Pengrowth Energy Corporation (TSX:PGF) (NYSE:PGH) today announced
its operating and financial results for the fourth quarter and full
year 2017 along with year-end 2017 reserve results.
“In 2017 we concluded our significant
transformation that has resulted in a restructured and refocused
Company with two 100 percent owned and operated growth assets at
Lindbergh and Groundbirch”, commented Derek Evans, President and
Chief Executive Officer of Pengrowth.
“We disposed of our high cost legacy assets and
applied approximately $1.0 billion of sale proceeds to debt
reduction. This leaves us with a much healthier balance sheet and a
much more focused long-life, high quality asset base characterized
by excellent low cost growth potential and significantly reduced
cost structures.”
“In 2018, our capital program is expected to
demonstrate the potential of this long-life, high quality asset
base through double-digit percentage growth in production from
approximately 19,000 barrels of oil equivalent (boe) per day at the
start of the year, to approximately 24,000 boe per day by the end
of the year. Leading the way will be our Lindbergh thermal
production which is expected to grow from 14,000 bbl per day to
approximately 18,000 bbl per day by year-end with operating costs
that are expected to decrease by approximately 15 percent on a year
over year basis. In addition, net operating and G&A cost
structures are expected to decrease by approximately 18 percent and
36 percent, respectively, on a year over year basis.”
2017
Highlights:
Last year, Pengrowth delivered on its
commitments to refocus its asset portfolio and strengthen its
balance sheet to position the Company for growth in
2018
- Successfully closed asset
dispositions for gross proceeds of approximately $1.0 billion in a
very challenging asset disposition market.
- Reduced total debt before working
capital by $1.08 billion during 2017 to a level of $610.5 million
at year-end 2017.
- Formalized an agreement with
lenders under its syndicated credit facility and term note
agreements, waiving and relaxing certain financial covenants until
December 31, 2019.
- Enhanced cost structures with a 28
percent reduction in net operating expenses in 2017 compared to
2016, with fourth quarter 2017 net operating expenses falling 60
percent compared to fourth quarter 2016.
- Realigned G&A expenses to match
the new focused asset base with reductions to costs of 20 percent
in 2017 compared to 2016. Further G&A expense reductions are
expected in the second half of 2018 upon completion of the
Company’s workforce restructuring resulting in per boe G&A
expenses of $2.46, representing a decrease of 36 percent from 2017
average costs.
- Managed exposure to WCS price
fluctuations through physical hedges that provide price protection
as well as pipeline apportionment protection. For 2018, 80 percent
of projected WCS production is price protected at an average price
differential of approximately U.S. $16.82 per bbl.
- Sold approximately 61 percent of
original 2017 production guidance while only selling approximately
26 percent of Proved plus Probable Reserves.
- Realigned reserve base reflecting
the core focus assets of the Company, with Lindbergh and
Groundbirch reserves accounting for 99 percent of the Company’s
Total Proved plus Probable Reserves at December 31, 2017 and
approximately 90 percent of 2018 forecast production.
- Reduced the number of wellbores,
operated facilities and kilometers of operated pipelines by greater
than 80 percent, resulting in a significant reduction in potential
environmental liabilities.
- Reduced the Discounted Asset
Retirement Obligations (ARO) by $415.6 million year over year from
$652.3 million on December 31, 2016 to $236.7 million (with $110
million pre-funded) on December 31, 2017.
- Established a year-end net present
value for Proved plus Probable Reserves (10 percent discount,
before tax) of $2.17 billion resulting in a net asset value (NAV)
per share of $3.01 at GLJ pricing.
Operations
Pengrowth achieved full year 2017 average daily
production of 40,428 boe per day, which was at the mid-point of the
Company’s production guidance of 39,500 to 41,500 boe per day.
Fourth quarter average daily production of 24,702 boe per day was
slightly ahead of previous expectations for 24,500 boe per day.
Fourth quarter and full year 2017 average daily production
decreased 55 percent and 29 percent, respectively, compared to the
same periods in 2016 mainly due to property divestments.
Net Operating and G&A
Expenses
Fourth quarter and full year 2017 net operating
expenses decreased $42.1 million or 60 percent and $77.0 million or
28 percent, respectively, compared to the same periods in 2016
primarily due to the absence of net operating expenses associated
with the divested properties. The full year 2017 decrease in net
operating expenses was partly offset by higher turnaround costs
incurred in 2017 and higher purchased natural gas costs at
Lindbergh. On a per boe basis, fourth quarter 2017 net operating
expenses decreased $1.72 mostly driven by the disposition of
properties with higher unit operating costs. Full year 2017 net
operating expenses per boe remained relatively unchanged compared
to the same period last year as decreases in production volumes and
higher turnaround and fuel costs in 2017 offset decreases in
costs.
Fourth quarter 2017 cash G&A expenses
decreased $5.2 million or 29 percent compared to the fourth quarter
2016 primarily due to reductions in staffing as a result of asset
dispositions. Full year 2017 cash G&A expenses decreased $13.8
million or 20 percent compared to the prior year, also driven by
reductions in staffing and a decrease in cash-settled sharebased
compensation expense.
Financial Results
Funds flow from operations amounted to $13.5
million ($0.02 per share) in the fourth quarter compared to funds
flow of $111.7 million ($0.20 per share) for the same period in
2016. Full year 2017 funds flow from operations of $69.4 million
($0.13 per share) decreased 84 percent compared to funds flow of
$429.7 million ($0.79 per share) during the same period last year.
The decrease in funds flow was primarily driven by divested
properties which resulted in lower volumes year over year combined
with realized commodity risk management losses.
Pengrowth recorded a net loss of $210.4 million
in the fourth quarter of 2017 compared to a net loss of $92.4
million in the fourth quarter of 2016 primarily due to impairment
of the Groundbirch E&E gas asset, lower funds flow from
operations primarily related to divested properties, realized
foreign exchange losses recorded in the quarter as a result of the
settlement of U.S. dollar swap contracts and loss on extinguishment
of debt as a result of the debt restructuring completed in the
quarter. These were partly offset by unrealized foreign exchange
gains recorded in the fourth quarter of 2017, lower unrealized
commodity risk management losses and lower DD&A expenses. Full
year 2017 net loss was $683.8 million compared to a net loss of
$293.7 million in 2016. The loss was due to impairment charges of
$634.4 million (approximately $463 million after-tax) coupled with
lower funds flow from operations related to 2017 divestments,
partly offset by the absence of unrealized commodity risk
management losses recorded in 2016 and lower DD&A expenses.
Financial Resources and
Liquidity
Pengrowth’s total debt (excluding letters of
credit) at December 31, 2017 amounted to Cdn $610.5 million
compared to Cdn $1.7 billion at December 31, 2016. The Company was
successful in reducing its total debt by over $1.0 billion through
a combination of repayment of Cdn $126.6 million of 6.25%
convertible debentures at maturity on March 31, 2017, US $400
million of the 6.35% senior term notes which matured on July 26,
2017 as well as prepaying US $265 million of the 6.98% senior term
notes and Cdn $15 million of the 6.61% senior term notes, which
were scheduled to mature on August 21, 2018. The majority of
Pengrowth's long term debt and interest payments are denominated in
US dollars and, as such, are subject to fluctuations in the
exchange rate between the Canadian and US dollars. Pengrowth
manages this foreign exchange exposure through swap contracts on
the majority of its outstanding foreign denominated notes. At
December 31, 2017 Pengrowth held US $255 million of swap contracts
at a weighted average exchange rate of Cdn $0.75/US $1.00.
2018 capital and production plans:
Setting the stage for growth
As previously disclosed, the Company’s Board of
Directors approved a 2018 capital expenditure budget of $65
million. 2018 capital spending will be focused on adding
production volumes at the Company’s two 100 percent owned and
operated assets at Lindbergh and Groundbirch.
Pengrowth will continue with its optimization
efforts at Lindbergh, where the Company has allocated approximately
$45 million towards continued development and maintenance
activities. Approximately $33 million of the Lindbergh capital has
been allocated to optimization activities and an eight infill well
drilling program. The remaining capital will be allocated to
maintenance and enhancement activities to support the continued
production growth from existing operations. The eight infill wells
in the 2018 capital program are scheduled to be drilled in the
second quarter of 2018 and are expected to be brought on stream in
the fourth quarter of 2018, increasing Lindbergh production to
approximately 18,000 bbl per day by the end of the year.
At Groundbirch, approximately $17 million of
capital is being directed to the completion and tie-in of the four
wells that were drilled in late 2017. The completion of these wells
is expected to increase natural gas production from Groundbirch
from the current 9.0 million cubic feet per day (MMcf per day) to
approximately 30 MMcf per day, with the initial volumes coming on
in April 2018. In addition to the drilling program, Pengrowth is
working on the completion of a compression project which is
expected to allow the Company to shift transportation of natural
gas production at Groundbirch away from Station Two and onto the
Nova Gas Transmission Limited (NGTL) system. Once the project is
completed, it is anticipated that the majority of the natural gas
produced by the Company (approximately 87 percent) will be
transported to Lindbergh where it will be used to support the
energy requirements of that project.
The pace of development at Groundbirch is
expected to be dependent on the energy requirements for Lindbergh
operations.
The 2018 capital budget is expected to grow
production volumes through the course of the year from a December
2017 exit production rate of approximately 19,000 boe per day to an
estimated 2018 exit rate of approximately 24,000 boe per day,
representing double-digit production growth for 2018.
Year-end 2017 Reserves: Reshaped to
reflect the new Pengrowth
Pengrowth’s reserves and resource values at year
end 2017 were based on an independent engineering evaluation
conducted by GLJ Petroleum Consultants Ltd. (GLJ) with an effective
date of December 31, 2017, using the GLJ January 1, 2018 price
forecast and prepared in accordance with National Instrument 51-101
(NI 51-101) and the Canadian Oil and Gas Evaluation Handbook
(COGEH).
The legacy non-core asset dispositions that
closed in 2017 resulted in a reserve profile that more closely
reflects the remaining assets and development focus of the Company.
In total, 158.3 million boe of Proved plus Probable reserves (based
on a December 31, 2016 GLJ reserve evaluation) were sold as part of
the disposition program.
- Pengrowth’s two key assets at
Lindbergh and Groundbirch account for 99 percent of the Company’s
Total Proved plus Probable reserves.
- Total Proved Reserves at
Pengrowth’s Lindbergh thermal oil project increased by
approximately 12 percent to 163.3 million boe as compared with year
end 2016 Total Proved Reserves of 146.3 million boe. The increase
was primarily due to extensions and improved recoveries, infill
drilling as well as technical revisions, offset by produced
volumes. Total Proved plus Probable Reserves of 317.1 million boe
at Lindbergh remained essentially unchanged from 2016 as additions
due to technical revisions offset volumes produced during the
year.
- Total Proved Reserves at
Pengrowth’s Groundbirch Montney gas project increased by
approximately 30 percent to 152.8 billion cubic feet as compared
with year end 2016 Total Proved Reserves of 117.5 billion cubic
feet. The increase was primarily due to extensions and improved
recoveries, technical revisions, and a land swap, offset by
produced volumes. Total Proved plus Probable Reserves of 746.5
billion cubic feet increased by approximately six percent from 2016
reserves of 702.6 billion cubic feet due to the addition of volumes
from a land swap, offset by produced volumes during the year.
- Overall, Pengrowth had Total Proved
Reserves of 192.7 million boe and Total Proved plus Probable
Reserves of 446.6 million boe compared to year-end 2016 reserves of
285.8 million boe and 608.5 million boe for Total Proved and Total
Proved plus Probable Reserves, respectively. The decline in
reserves year over year was solely attributable to assets sold as
part of Pengrowth’s 2017 asset disposition program.
- Pengrowth’s three year average
finding and development (F&D) costs were $6.95 per boe
including changes in future development costs (FDC) for Proved plus
Probable Reserves. Excluding changes to FDC, the three year F&D
costs were $2.38 per boe for Proved plus Probable reserves.
Pengrowth’s 2017 Finding and Development costs reflect the impacts
from the large disposition program, and may not be comparable to
prior year numbers. The three year average costs take out the
impact of when reserves are booked and when the capital to develop
them is spent.
- The approximate 27 percent decrease
in Total Proved plus Probable Reserves compared to December 31,
2016 resulted from asset dispositions of 158.3 million boe and
production of 14.8 million boe, offset by a combination of
technical revisions and acquired reserves which added 11 million
boe.
Net Asset Value
The following table provides a calculation of
Pengrowth’s estimated NAV based on the estimated future net
revenues associated with Pengrowth's Proved plus Probable Reserves.
Pengrowth calculates NAV to measure its performance. NAV is not
necessarily calculated in the same manner by all issuers.
Accordingly, it should not be used to make comparisons amongst
different issuers.
table 1. Net Asset
Value – Before Income TaxAs at December 31, 2017
|
|
|
($ millions, except percentages and share numbers) |
Discounted at 5% |
Discounted at 10% |
Value of total Proved plus Probable Reserves(1) |
$3,976 |
$2,170 |
Undeveloped Land(2) |
$26 |
$26 |
Long-term debt, including bank debt and working capital(3) |
($744) |
($744) |
Reclamation funds(4) |
$100 |
$100 |
Other assets/liabilities (asset retirement obligations, commodity
contracts)(3)(5) |
$242 |
$109 |
Net Asset Value |
$3,600 |
$1,661 |
Shares outstanding (millions) |
552 |
552 |
NAV per share ($ per share) |
$6.52 |
$3.01 |
|
|
|
- Discounted net present value of GLJ total Proved plus Probable
Reserves.
- Internal undeveloped land value estimate.
- See the 2017 Annual Financial Statements and Notes. Excludes
letters of credit.
- Prepaid non-current portion of reclamation costs for Sable
Offshore Energy Project and tax receivable.
- Internal estimated fair value of commodity contracts and other
liabilities.
Further information on Pengrowth’s reserves and
resources is available in the Company’s Annual Information Form
(AIF) dated February 28, 2018, which is available on the Company’s
website at www.pengrowth.com and on SEDAR at www.sedar.com as well
as on EDGAR at www.sec.gov.
Executive Changes
On February 20, 2018, Pengrowth announced the
planned retirement of Derek Evans as President and CEO effective
March 15, 2018 and the appointment of Mr. Peter D. Sametz as his
successor. Mr. Evans will continue in a transitional advisory role
until June 30, 2018 to provide support during the leadership
transition. In addition, on January 25, 2018, the Company announced
the appointment of Randy Steele as Chief Operating Officer. Mr.
Steele previously served as Senior Vice President, Conventional
Operations with Pengrowth.
Outlook
As we turn the page on 2017, we look forward to
a new chapter in 2018. The Company’s substantial success in selling
assets, reducing its debt and refocusing its portfolio has
redefined the Company and positioned it on the road for growth. The
leaner, more focused Pengrowth is underpinned by two core assets at
Lindbergh and Groundbirch that are expected to offer double-digit
organic and self-funded growth in production over the course of
2018. The Company’s balance sheet is much stronger and, with no
term debt maturities until October 2019, it is well positioned to
execute on its development plans and further enhance its financial
strength.
Year End Disclosure
Documents
Today, Pengrowth is filing its audited Annual
Consolidated Financial Statements and related Management’s
Discussion and Analysis, as well as its 40-F containing the AIF
dated February 28, 2018, for the year ended December 31, 2017. The
documents can be viewed on Pengrowth’s website at
www.pengrowth.com. They are also available on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov. Hard copies of
Pengrowth’s complete Annual Report can also be requested free of
charge by contacting Pengrowth Investor Relations at
investorrelations@pengrowth.com.
Analyst call
Pengrowth will host an analyst call and
listen-only audio webcast beginning at 6:30 A.M. Mountain Time (MT)
on Thursday, March 1, 2018, during which management will review
Pengrowth's fourth quarter results and respond to questions from
the analyst community.
To ensure timely participation in the
teleconference, callers are encouraged to dial in 10 minutes prior
to the start of the call to register.
Dial-in numbers:
Toll free: (844) 358-9179 or International: (478)
219-0186 Live listen only audio webcast:
https://edge.media-server.com/m6/p/dkpezmni
About Pengrowth:
Pengrowth Energy Corporation is a
Canadian intermediate energy company focused on the
sustainable development and production of oil and natural gas in
Western Canada from its Lindbergh thermal oil property and its
Groundbirch Montney gas property. The Company is headquartered in
Calgary, Alberta, Canada and has been operating in the Western
basin for over 28 years. The Company’s shares trade on both the
Toronto Stock Exchange under the symbol "PGF" and on the New York
Stock Exchange under the symbol "PGH".
PENGROWTH ENERGY CORPORATIONDerek Evans
President and Chief Executive Officer
Contact information:
Wassem KhalilManager, Investor Relations Toll
free 1-855-336-8814
For further information about Pengrowth, please
visit our website www.pengrowth.com or contact: Investor Relations,
E-mail: investorrelations@pengrowth.com
Advisories:
Currency:All amounts are stated
in Canadian dollars unless otherwise
specified.
Caution Regarding Engineering Terms: When used
herein, the term "boe" means barrels of oil equivalent on the basis
of one boe being equal to one barrel of oil or NGLs or 6,000 cubic
feet of natural gas (6 mcf: 1 bbl). Barrels of oil equivalent may
be misleading, particularly if used in isolation. A conversion
ratio of six mcf of natural gas to one boe is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead. All
production figures stated are based on Company Interest before the
deduction of royalties.
Advisory Regarding Reserves All
reserves, reserve life index, and production information herein is
based upon Pengrowth’s company interest (Pengrowth’s working
interest share of reserves or production plus Pengrowth’s royalty
interest, being Pengrowth’s interest in production and payment that
is based on the gross production at the wellhead), before royalties
and using GLJ’s January 1, 2018 forecast prices and costs in
respect of the December 31, 2017 reserves update. Numbers presented
may not add due to rounding.
The estimated value of reserves disclosed in
this press release does not represent the fair market value of the
reserves. The estimates of reserves and future net revenues for
individual properties may not reflect the same confidence level as
estimates of reserves and future net revenue for all properties,
due to effects of aggregation.
SOR refers to the efficiency of a steam
injection recovery process and is the measure of steam, in
equivalent barrels of water required to produce one barrel of
bitumen, currently or at any time.
Proved Reserves refers to those reserves that
can be estimated with a high degree of certainty to be recoverable;
it is likely that the actual remaining quantities recovered will
exceed the estimated proved reserves.
Probable Reserves refers to those additional
reserves that are less certain to be recovered than Proved
Reserves; it is equally likely that the actual remaining quantities
recovered will be greater or less than the sum of the estimated
Proved plus Probable Reserves.
Total Proved Plus Probable Reserves or 2P means
the aggregate of proved reserves and probable reserves.
Caution Regarding Forward Looking
Information: This press release contains forward-looking
statements within the meaning of securities laws, including the
"safe harbour" provisions of the Canadian securities legislation
and the United States Private Securities Litigation Reform Act of
1995. Forward-looking information is often, but not always,
identified by the use of words such as "anticipate", "believe",
"expect", "plan", "intend", "forecast", "target", "project",
"guidance", "may", "will", "should", "could", "estimate", "predict"
or similar words suggesting future outcomes or language suggesting
an outlook. Forward-looking statements in this press release
include, but are not limited to, statements with respect to
expected double-digit growth in exit production; expected exit
production of 24,000 boe per day; G&A cost structures expected
to decrease by 16 percent and 36 percent, respectively; anticipated
$65 million of capital expenditures in 2018 and the focus thereof
on adding production volumes at Lindbergh and Groundbirch; expected
average daily production in 2018; expectation of Lindbergh being
one of the most economic, long life SAGD projects in Canada;
allocation of 2018 capital budget; expected long-term growth in
production and cash flow from Lindbergh; continued optimization
activities at Lindbergh including the drilling of eight additional
infill wells; Lindbergh production reaching 18,000 boe per day by
the end of the year; expectation of new infill wells to be on
stream by the fourth quarter of 2018; anticipated reduction of
Lindbergh operating costs by 15 percent; anticipated completion and
tie-in of four wells at Groundbirch in the first quarter of 2018;
expected increase in production at Groundbirch to 30 MMcf per day
by the end of 2018 with initial volumes coming on in April of 2018;
expected completion of a compression project at Groundbirch which
is expected to allow the Company to shift transportation from
Station Two on to the Nova system and expectation that the majority
of gas produced at Groundbirch will then be transported to
Lindbergh to be used to support the energy requirements of that
project; plans to utilize the majority of Groundbirch natural gas
in the Company’s thermal operations; anticipated breakdown of
expected 2018 production volumes; anticipated net operating
expenses and decreases from 2017 actuals; anticipated G&A
expenses and decreases from 2017 actuals; Pengrowth being well
positioned to execute on a development plan and further enhance its
financial strength; and ultimate development potential of
Lindbergh. Forward-looking statements and information are based on
current beliefs as well as assumptions made by and information
currently available to Pengrowth concerning anticipated financial
performance, business prospects, strategies and regulatory
developments. Although management considers these assumptions to be
reasonable based on information currently available to it, they may
prove to be incorrect.
By their very nature, forward-looking statements
involve inherent risks and uncertainties, both general and
specific, and risks that predictions, forecasts, projections and
other forward-looking 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 differ
materially from the beliefs, plans, objectives, expectations and
anticipations, estimates and intentions expressed in such
forward-looking statements. These factors include, but are not
limited to: changes in general economic, market and business
conditions; the volatility of oil and gas prices; fluctuations in
production and development costs and capital expenditures; the
imprecision of reserve estimates and estimates of recoverable
quantities of oil, natural gas and liquids; Pengrowth's ability to
replace and expand oil and gas reserves; geological, technical,
drilling and processing problems and other difficulties in
producing 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;
fluctuations in interest rates; inadequate insurance coverage;
compliance with environmental laws and regulations; actions by
governmental or regulatory agencies, including changes in tax laws;
Pengrowth's ability to access external sources of debt and equity
capital; the impact of foreign and domestic government programs and
the occurrence of unexpected events involved in the operation and
development of oil and gas properties. Further information
regarding these factors may be found under the heading "Business
Risks" in our most recent management's discussion and analysis and
under "Risk Factors" in our Annual Information Form dated February
28, 2018.
The foregoing list of factors that may affect
future results is not exhaustive. When relying on our
forward-looking statements to make decisions, investors and others
should carefully consider the foregoing factors and other
uncertainties and potential events. Furthermore, the
forward-looking statements contained in this press release are made
as of the date of this press release, and Pengrowth 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 laws. The forward-looking statements contained in this
press release are expressly qualified by this cautionary
statement.
The forward-looking statements contained in this
press release are expressly qualified by this cautionary
statement.
Additional and Non-GAAP
Measures In addition to providing measures prepared in
accordance with International Financial Reporting Standards (IFRS),
Pengrowth presents additional and non-GAAP measures including total
debt before working capital, total debt including working capital,
net operating costs and cash G&A expenses.
With respect to F&D costs disclosed in this
press release:
- F&D costs both including and excluding FDC have been
presented herein. F&D costs for each reserves category in a
particular period are calculated by taking the sum of: (i)
exploration and development costs incurred in the period; and (ii)
where FDC has been included, the change during the period in FDC
for the reserves category; divided by the additions to the reserves
category before production during the period. F&D costs exclude
the effects of acquisition and dispositions. FD&A costs are
calculated in the same manner as F&D costs but include the
effect of acquisitions and dispositions.
- In calculating the amounts of F&D costs for a year, the
changes during the year in estimated reserves and estimated FDC are
based upon the evaluations of Pengrowth’s reserves prepared
by its independent qualified reserves evaluators, effective
December 31 of such year.
- The aggregate of the exploration and development costs incurred
in the most recent financial year and any change during that year
in estimated FDC generally will not reflect total F&D costs
related to reserves additions for that year.
- F&D costs may be used as a measure of a company's
efficiency with respect to finding and developing its
reserves.
These measures do not have any standardized
meaning prescribed by GAAP and therefore are unlikely to be
comparable to similar measures presented by other companies.
These measures are provided, in part, to assist
readers in determining Pengrowth’s ability to generate cash from
operations. Pengrowth believes these measures are useful in
assessing operating performance and liquidity of Pengrowth’s
ongoing business on an overall basis. These measures should be
considered in addition to, and not as a substitute for, net income
(loss), cash provided by operations and other measures of financial
performance and liquidity reported in accordance with IFRS. Further
information including reconciliation to the applicable GAAP measure
with respect to these additional and non-GAAP measures can be found
in the MD&A.
Note to US ReadersWe report our
production and reserve quantities in accordance with Canadian
practices and specifically in accordance with NI 51- 101. These
practices are different from the practices used to report
production and to estimate reserves in reports and other materials
filed with the SEC by companies in the United States.
Current SEC reporting requirements permit, but
do not require United States oil and gas companies, in their
filings with the SEC, to disclose probable and possible reserves,
in addition to the required disclosure of proved reserves. The SEC
does not permit the inclusion of estimates of contingent resources
in reports filed with it by United States companies. Under current
SEC requirements, net quantities of reserves are required to be
disclosed, which requires disclosure on an after royalties basis
and does not include reserves relating to the interests of others.
Because we are permitted to prepare our reserves information in
accordance with Canadian disclosure requirements, we have included
contingent resources, disclosed reserves before the deduction of
royalties and interests of others and determined and disclosed our
reserves and the estimated future net cash therefrom using forecast
prices and costs. See "Presentation of our Reserve Information" in
our most recent Annual Information Form or Form 40-F for more
information.
We incorporate additional information with
respect to production and reserves which is either not generally
included or prohibited under rules of the SEC and practices in the
United States. We follow the Canadian practice of reporting gross
production and reserve volumes; however, we also follow the United
States practice of separately reporting these volumes on a net
basis (after the deduction of royalties and similar payments). We
also follow the Canadian practice of using forecast prices and
costs when we estimate our reserves. The SEC permits, but does not
require, the disclosure of reserves based on forecast prices and
costs.