West Energy announces 2009 year-end reserves and operational update
/NOT FOR DISTRIBUTION TO
2009 Highlights:
- Total Proved plus Probable ("P+P") reserves of 19.3 million BOE, an
increase of 138 percent over December 2008 reserves of 8.1 million
BOE.
- Present value before tax of 10 percent (PVBT10) of P+P reserves is
$449 million, an increase of 174 percent over $164 million as at
December 2008.
- Oil and natural gas liquids comprise 84 percent of P+P reserves
- Reserves life index increased to 7.0 years from 3.7 years in 2008
- Drilling activity provided 4.8 MMboe of P+P reserve additions
- 90% of the P+P reserves value is associated with West's Pembina light
oil position
- Nisku reserves represent 25% of the 2009 reserve base compared with
77% in 2008
- Per share reserves growth of 136 percent
- Proved Developed Producing reserves comprise 47 percent of P+P
reserves
- Finding and Development Costs, including future development capital is
$22.91 on a total proved basis and $19.58 on a P+P basis
- Net asset value per share growth from $3.19 in 2008 to $5.96 in 2009
GLJ Petroleum Consultants Ltd ("GLJ") has prepared an independent assessment of the Company's reserves dated
December 31, 2009 Present
Value Before Tax
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RESERVES CATEGORY Light Oil Discount Discount
Gross Working Oil NGL Gas Equivalent 10% 15%
Interest (Mbbl) (Mbbl) (MMcf) (Mbbl) (M$) (M$)
----------------- ------ ------ ------ ---------- -------- --------
PROVED
Developed
Producing 7,038 746 8,074 9,130 220,250 184,687
Developed
Non-Producing 724 198 3,647 1,530 42,588 37,938
Undeveloped 2,157 37 1,036 2,367 57,424 47,474
------ ------ ------ ---------- -------- --------
TOTAL PROVED 9,918 982 12,757 13,027 320,261 270,099
PROBABLE 4,942 409 5,507 6,269 129,024 101,990
------ ------ ------ ---------- -------- --------
TOTAL PROVED PLUS
PROBABLE 14,860 1,391 18,264 19,295 449,286 372,089
------ ------ ------ ---------- -------- --------
------ ------ ------ ---------- -------- --------
Notes:
1. The reserves report has been prepared in accordance with the
definitions, procedures and standards contained in the Canadian Oil
and Gas Evaluation Handbook and the Canadian Securities
Administrators National Instrument; NI51-101.
2. Barrels of Oil Equivalent ('boe") may be misleading, particularly if
used in isolation. A boe conversion ratio of 6MCF:1bbl is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead.
3. The estimated net present value of future net revenue is based on
current legislation in place at December 31, 2009.
4. The product price, market forecasts and currency exchange rate were
supplied by GLJ and are effective January 1, 2010. A copy of the
price forecast used can be found on the GLJ website at www.gljpc.com
5. Prices for oil F.O.B. Edmonton are based upon 40 degrees API oil
having less than 0.4% sulphur. The wellhead oil prices were adjusted
for quality and transportation based on historical actual prices.
6. Prices and volumes for natural gas are based upon a base pressure of
14.65 pounds per square inch and base temperature of 60 degrees F.
The natural gas prices were adjusted, where necessary, based on
historical pricing based on heating values and the differing costs of
service applied by various purchasers.
7. The natural gas liquids prices were adjusted to reflect historical
average prices received.
8. The forecast prices and cost case assumes no legislative or
regulatory amendments and includes the effects of inflation. The
estimated future net revenue to be derived from the production of the
reserves includes an inflation rate of 2.0% per year.
Reserves Reconciliation
Working Interest
------------------------
Gross
Gross Proved plus
Proved Probable
Category (Mboe) (Mboe)
--------------------------------------------- -------- -----------
January 1, 2009 4,496 8,125
Extensions and Improved Recovery 2,891 5,454
Technical Revisions 262 (843)
Discoveries 786 1,047
Acquisitions 6,083 7,003
Dispositions - -
Economic Factors - -
Production (1,491) (1,491)
-------- -----------
December 31, 2009 13,027 19,295
Reserves by Area
The company was able to significantly reduce its reliance for growth on its traditional Nisku reserve base as a result of the acquisition of the Warburg properties and the Cardium drilling program undertaken in 2009. The Warburg and Cardium P+P reserves now comprise 60 percent of the total Company reserves while the Nisku reserves represent only 25 percent of the total Corporate reserves compared to 77 percent in the prior year. A summary of the reserves by geographic location is provided below.
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PROVED PLUS PROBABLE RESERVES
- BY AREA 2009 2008
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Company Interest - Including (Mboe) Percent (Mboe) Percent
royalty interests
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Warburg - Belly River and
Cardium Units 7,203 37% - 0%
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Pembina - Cardium Resource Play 4,409 23% - 0%
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Crossfire - Nisku and Ellerslie 3,592 19% 1,969 24%
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Pembina - Paddy Creek and Other 2,134 11% 4,493 55%
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Other 2,009 10% 1,674 21%
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Total 19,347 100% 8,136 100%
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Total proven reserves include 17 gross (13.1 net) proved undeveloped locations with future development capital obligations of
Finding and Development Costs
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Finding Development & Acquisition
Cost - Summary information 2009 2008
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Proved Proved
Total plus Total plus
Proved Probable Proved Probable
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Exploration and Development
Expenditures 50,922 50,922 50,573 50,573
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Acquisition (Disposition)
Expenditures 147,733 147,733 (3,902) (3,902)
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Change in Future Development
Costs 34,334 52,327 (6,863) 6,928
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Total Capital Invested 232,989 250,982 39,808 53,599
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Finding & Development Costs
(Excluding Acquisitions) $ 21.05 $ 17.88 $ 17.96 $ 18.94
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Finding & Development Costs
(Including Acquisitions) $ 22.91 $ 19.58 $ 19.56 $ 20.22
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For the 2010 year, using a WTI oil price of US$78 per barrel, natural gas at
2009 versus 2008 Comparatives
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Reserves at December 31 (Working interest) 2009 2008 Change
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Proved Developed Producing (Mboe) 9,130 2,546 259%
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Total Proved (Mboe) 13,027 4,496 190%
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Proved plus Probable (Mboe) 19,295 8,125 137%
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Net Present Value of Reserves, before tax,
discounted at 10%
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Proved Developed Producing ($M) 220,250 58,929 274%
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Total Proved ($M) 320,261 96,070 233%
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Proved plus Probable ($M) 449,286 163,798 174%
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Undeveloped land (Net acres) 125,221 88,134 42%
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Undeveloped land ($M) 133,760 12,200 996%
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Cash (Net Debt) (bank plus working
capital deficiency) (93,929) 70,391 -233%
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Number of shares issued and outstanding 82,271 81,551 1%
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Net Asset Value Proved plus Probable PV10
(per share) $ 5.96 $ 3.19 87%
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Certain financial information included in this press release for the year
ended December 31, 2009 such as finding and development costs, production
information and net asset value calculations are based on estimated
unaudited financial results for the year ended December 31, 2009 and are
subject to the same limitations as discussed under forward-looking
statements outlined at the end of this release. These estimated amounts
may change upon completions of the audited financial statements for the
year ended December 31, 2009 and those changes may be material.
Operational Update
Pembina Cardium Project
The Company is one of the most active horizontal drillers in the Cardium light oil resource play in Alberta. At east Pembina, West successfully drilled 9 gross (6.8 net) multi-fractured horizontal Cardium wells in 2009. Four wells (2.6 net) were producing in January with another five (4.2 net) wells coming on production over the next week. Early results suggest that the average well first month production is approximately 196 boe per day (86 % oil). GLJ estimates that the average Cardium reserves per horizontal well are 125 Mboes on a proven basis and 150 Mboes on a P+P basis. West continues to optimize its drilling and completions program to reduce costs and improve well performance.
So far in Q1, 2010 the company has drilled 3 gross (2.8 net) Cardium Hz wells. One well has been multi-fracture stimulated and is currently flowing back load fluid and the others are expected to be completed by the end of February. West has plans to drill another 3 gross (1.6 net) horizontal Cardium wells prior to spring break up.
The company continues to capture and enhance its Cardium inventory. The GLJ yearend evaluation has included 30 gross (21.8 net) probable horizontal locations. The Company has an unbooked Cardium horizontal drilling inventory for which no reserves have been assigned of 106 gross (73.8 net) wells assuming a maximum well spacing of three wells per section.
The Company is actively working on two other light oil resource projects. At Warburg, West plans to drill horizontal multi fractured wells into the Belly River formation to develop the known oil resource. Recently other operators in the area have had success drilling horizontal wells into the Belly River zone. In addition the extensive Warburg lands have unbooked upper Belly River gas reserves that the previous owner had booked as probable reserves.
The second developing light oil resource play at Two Rivers in British Columbia, the Company plans to follow-up its recent horizontal multi fractured oil well into the Montney formation. Production testing results from the well remain confidential.
Crossfire Development
In 2009 the Company had excellent success drilling Nisku and Ellerslie exploration prospects in the Crossfire area. A drilling license for a Nisku location at 16-31-49-6W5 (W.I. 100%) was received on
The final regulatory approvals to construct a 6 inch pipeline from two standing Nisku oil wells at 11-12-51-5W6 (W.I. 60%) and 15-33-50-5W5 (W.I. 60%) was received on
The Q4 2009 Nisku discovery well located at 03-03-50-6W5 (W.I. 100%) has been dually completed as both a water injector and producing Nisku well. The well configuration is similar to an existing Nisku oil well located at 9-1-50-6W5 where West has been operating since
In early
Summary
Current production is approximately 5400 BOED of which 81% is light oil and NGL. The current production includes 2.6 net new Cardium wells. The new Crossfire Nisku well at 3-3-50-6W5 is tied-in and capable of producing and will be production tested over the next month. The 3-3 well will maintain the Company's existing Nisku production base.
The repair of the Crossfire Battery sales oil line was not completed until
West will adjust its 2010 capital program to account for the Nisku drilling. With a Nisku well drilling and at least two more Nisku licenses expected in Q1 2010 the company may expand its capital program in the latter half of the year. With the finalization of the 2009 reserves evaluation, the Company anticipates an increase in its corporate borrowing base and as a result, an expansion of its bank credit facilities. West anticipates releasing its audited annual financial statements for the year ended
West is pleased to announce that
The 2009 reserves evaluation and large 2010 light oil drilling program confirms that West has successfully transformed itself into a light oil oriented energy company with a diversified portfolio of resource drilling in the Cardium, Belly River and Montney plays and an exciting inventory of exploration opportunities.
Reader's Advisory:
Certain information regarding West Energy Ltd. in this news release including the reserve estimates, the projected levels of production, revenues, royalties and operating expenses used to determine operating net-backs and recycle ratios, the value attributed by the Company to its assets including an internal estimate of the value of undeveloped lands, as well as the Company's future plans and operations and their timing may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, changes to royalty regimes, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information and that could cause actual results to differ materially from those anticipated in the forward-looking statements are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or at the Company's website (www.westenergy.ca). Furthermore, the forward-looking statements contained in this news release are made as of the date of this news release 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 may be required by applicable securities laws.
Disclosure provided herein in respect of barrel(s) of oil equivalent (Boe) may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 mcf:1 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. There is no certainty that it will be commercially viable to produce any portion of the resources that are discovered resources. There is no certainty that any portion of the resources that are undiscovered resources will be discovered and, if discovered, there is no certainty that it will be commercially viable to produce any portion of such resources.
For further information: Ken McCagherty, President and Chief Executive Officer, Email: [email protected], Direct Phone: (403) 716-3458; Scott Bridge, Vice President Finance and Chief Financial Officer, Email: [email protected], Direct Phone: (403) 716-3457
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