(TSX-V:BBI) Blackbird Energy Inc. (“
Blackbird” or
the “
Company”) is pleased to announce the results
of an updated independent resource evaluation (“
2018
Resource Evaluation”) by McDaniel & Associates
Consultants Ltd. (“
McDaniel”) in respect of
the Company’s Pipestone/Elmworth Montney lands. McDaniel prepared
the evaluation in accordance with the standards set out in National
Instrument 51-101 of the Canadian Securities Administrators and the
Canadian Oil and Gas Evaluation Handbook.
“Blackbird’s updated contingent resource
evaluation is a critical step in our planning for future
development. The report supports Blackbird’s significant
undeveloped value and resource inventory beyond our existing
reserves base for future growth and provides management with
confidence to enter into discussions for expanded future processing
capacity.” said Garth Braun, President, CEO and Chairman of
Blackbird.
McDaniel previously conducted an independent
resource evaluation of Blackbird’s Pipestone/Elmworth Montney lands
in 2017 (the “2017 Resource Evaluation”). The 2018
Resource Evaluation is effective as of May 1, 2018, and is based on
McDaniel’s forecast commodity pricing at April 1, 2018. The 2017
Resource Evaluation report was effective March 1, 2017 and based on
McDaniel’s forecast commodity pricing at January 1, 2017. The
results of the 2018 Resource Evaluation are summarized in the
discussion and tables that follow.
These contingent resources are in addition to
the Company’s proved plus probable reserves evaluated by McDaniel
effective July 31, 2017, as previously disclosed by Blackbird.
Estimates of net present value (NPV) of future
net revenue attributed to the contingent resources, whether or not
risked, do not represent their fair market value. Certain
contingencies currently prevent the classification of these
contingent resources as reserves. Information on these
contingencies is provided in the footnotes to the tables below.
There is no certainty that it will be commercially viable to
produce any portion of the contingent resources.
Highlights
- Total Best Estimate Net Contingent Resources of 112.2
MMboe: The 2018 Resource Evaluation reports Best Estimate
Development Pending Contingent Resources of 112.2 MMboe (43%
liquids) as of May 1, 2018. This represents an 149% increase from
the Best Estimate Development Pending Contingent Resources of 45.0
MMboe from the 2017 Resource Evaluation.
- Risked Before Tax NPV10 of $587.3 Million: The
corresponding estimate of risked before tax NPV of future net
revenue for Best Estimate Development Pending Contingent Resources,
using a discount rate of 10% per year, is $587.3 million CAD. This
represents an 35% increase from the risked before tax NPV,
discounted at 10% per year, of $436.5 million CAD from the 2017
Resource Evaluation.
- Contingent Resources Booked on 33.4 of 113.5 Net
Sections: Per Figure 1 below, Blackbird
has now booked 33.4 of its 113.5 net sections on a contingent
resource basis, representing 29.4% of Blackbird's
Pipestone/Elmworth Montney acreage. Contingent resources have been
booked in two of four prospective Montney intervals.
Contingent Resources
Summary
The following table sets forth the estimated
volumes (by product type) of Best Estimate Development Pending
Contingent Resources as of May 1, 2018, as evaluated by McDaniel in
the 2018 Resource Evaluation, together with corresponding estimates
of before tax NPV of future net revenue, on an unrisked basis and
also risked for an estimated 80% chance of development.
An estimate of risked NPV of future net
revenue of contingent resources is preliminary in nature and is
provided to assist the reader in reaching an opinion on the merit
and likelihood of Blackbird proceeding with the required
investment. It includes contingent resources that are considered
too uncertain with respect to the chance of development to be
classified as reserves. There is uncertainty that the risked NPV of
future net revenue will be realized.
Best Estimate Development Pending Contingent
Resources(1)(2)(3)(4)(5)(6)(7) |
Chance of Development |
Best Estimate Unrisked |
Best Estimate Risked |
Crude Oil (Mbbl) |
80 |
% |
|
2,834 |
|
2,267 |
Natural Gas (MMcf) |
80 |
% |
|
478,356 |
|
382,685 |
Condensate (Mbbl) |
80 |
% |
|
45,510 |
|
36,408 |
Natural Gas Liquids (Mbbl)(8) |
80 |
% |
|
12,165 |
|
9,732 |
Total (Mboe)(9) |
80 |
% |
|
140,235 |
|
112,188 |
NPV Before Tax ($ million), discounted
at |
|
|
0% |
|
$3,058 |
$2,446 |
5% |
|
$1,411 |
$1,129 |
10% |
|
$734 |
$587 |
Notes: |
|
|
|
(1) |
Net
(after royalties) using forecast prices and costs, including
McDaniel's commodity price forecasts at April 1, 2018. Net
contingent resources are working interest (operating or
non-operating) share after deduction of royalty obligations, plus
royalty interests in contingent resources. All of the
Company's properties to which contingent resources are booked are
located in Alberta. |
|
|
(2) |
Contingent Resources are defined in the Canadian Oil and Gas
Evaluation Handbook (“COGE Handbook”) as those quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations using established technology
or technology under development, but are not currently considered
to be commercially recoverable due to one or more contingencies.
Contingencies may include factors such as economic, legal,
environmental, political and regulatory matters or a lack of
markets. It is also appropriate to classify as Contingent Resources
the estimated discovered recoverable quantities associated with a
project in the early evaluation stage. |
|
|
(3) |
Pursuant
to the COGE Handbook, there are three classification levels of
Contingent Resource estimates: Low Estimate, Best Estimate and High
Estimate. Best estimate is considered to be the best estimate of
the quantity that will be actually recovered. It is equally likely
that the actual remaining quantities recovered will be greater or
less than the best estimate. If probabilistic methods are used,
there should be at least a 50% probability that the quantities
actually recovered will equal or exceed the best estimate. All
numbers in the table above are “Best Estimate”. |
|
|
(4) |
Pursuant
to the COGE Handbook, Contingent Resources are sub-classified based
on project maturity. All Contingent Resources indicated in
the 2018 Resource Evaluation have been sub-classified as
"Development Pending", which applies in circumstances where
resolution of the final conditions for development is being
actively pursued and indicates a relatively high chance of
development versus the other sub-classifications. |
|
|
(5) |
All
Contingent Resources have been risked for chance of development.
For Contingent Resources, the chance of development is the
estimated probability of a project being commercially viable, and
development proceeding in a timely fashion. Determining chance of
development requires consideration of each applicable contingency
and quantifying them so as to arrive at an overall development risk
factor. In quantifying the chance of development for purposes of
the 2018 Resource Evaluation, factors that were assessed
quantitatively to be less than one in the development risk
calculation included the economic status, the project evaluation
scenario status, and the development time frame. The chance of
development multiplied by the unrisked resource volume estimate
yields the risked resource volume estimate. As many of these
factors have a wide range of uncertainty and are difficult to
quantify, the chance of development is an uncertain value that
should be used with caution. |
|
|
(6) |
Continuous development through multi-year exploration and
development programs and significant levels of future capital
expenditures are required in order for additional resources to be
recovered in the future. The principal risks that would inhibit the
recovery of additional reserves relate to the potential for
variations in the quality of the Montney formation where minimal
well data currently exists, access to the capital required to
develop the resources, low commodity prices that would curtail the
economics of development and the future performance of wells,
regulatory approvals, access to required services at an appropriate
cost, and the effectiveness of well fracturing technology and
applications. For Contingent Resources to be converted to reserves,
Blackbird must ascertain commercial production rates, then develop
firm plans, including with respect to timing, infrastructure and
the commitment of capital. Confirmation of commercial productivity
is generally required before the Company can prepare firm
development plans and commit required capital for the development
of the Contingent Resources. Additional contingencies relate to the
current lack of infrastructure required to develop the resources in
a relatively quick time frame. As continued delineation occurs,
some resources currently classified as Contingent Resources are
expected to be re-classified to reserves. |
|
|
(7) |
There is
uncertainty that it will be commercially viable to produce any
portion of these resources. |
|
|
(8) |
Natural
Gas Liquids do not include Condensate. |
|
|
(9) |
Barrels
of Oil Equivalent (BOE) based on a ratio of 6:1 for Natural Gas,
1:1 for Condensate and C5+, 1:1 for Ethane, 1:1 for Propane, and
1:1 for Butanes. BOE may be misleading, particularly if used in
isolation. A BOE conversion ratio of 6 Mcf:1 bbl is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. |
The estimated cost reflected in the 2018
Resource Evaluation to bring on commercial production from the Best
Estimate Development Pending Contingent Resources for all four
product types is approximately $1,833 million (when discounted at
10%, the estimated cost is approximately $668 million). The
expected timeline to bring these resources on production is between
the years 2021 and 2042. Best Estimate Development Pending
Contingent Resources are expected to be recovered using the same
technology of horizontal drilling and multi-stage fracturing that
Blackbird has already proven to be effective in its
Pipestone/Elmworth Montney play.
Blackbird anticipates announcing updated
reserves data as at July 31, 2018, along with financial and
operational results for the year then ended, before the end of
November, 2018.
About BlackbirdBlackbird Energy Inc. is a highly
innovative oil and gas exploration and development company focused
on the condensate and liquids-rich Montney fairway at
Pipestone/Elmworth, near Grande Prairie, Alberta.
For more information, please view our Corporate
Presentation at www.blackbirdenergyinc.com or contact:
Blackbird Energy Inc.Garth BraunPresident, CEO
and Chairman(403) 500-5550gbraun@blackbirdenergyinc.com
Allan DixonManager, Business Development(403)
699-9929 Ext. 103adixon@blackbirdenergyinc.com
Advisories
Forward-Looking Statements
This news release contains certain statements
("forward-looking statements") that constitute forward-looking
information within the meaning of applicable Canadian securities
laws. Forward-looking statements relate to future results or
events, are based upon internal plans, intentions, expectations and
beliefs, and are subject to risks and uncertainties that may cause
actual results or events to differ materially from those indicated
or suggested therein. All statements other than statements of
current or historical fact constitute forward-looking
statements. Forward-looking statements are typically, but not
always, identified by words such as "anticipate", "continue",
"estimate", "expect", "intend", "may", "will", "should", "believe",
"plan", "objective", "potential" and similar or other expressions
indicating or suggesting future results or events.
Forward-looking statements are not promises of
future outcomes. There can be no assurance that the results
or events indicated or suggested by the forward-looking statements,
or the plans, intentions, expectations or beliefs contained therein
or upon which they are based, are correct or will in fact occur or
be realized (or if they do, what benefits the Company may derive
therefrom).
In particular, but without limiting the
foregoing, this news release contains forward-looking statements
pertaining to: expansion of future processing capacity, the
prospectivity of additional unbooked intervals on Blackbird’s
lands, resolution of the final conditions for developing contingent
resources, the conversion of contingent resources to reserves, the
estimated cost to bring contingent resources on commercial
production and the expected timeline to do so, future recovery
techniques, and timing for announcement of updated reserves data as
at July 31, 2018. In addition, references to reserves and resources
are deemed to be forward-looking information, as they involve the
implied assessment, based on certain estimates and assumptions,
that the resources described exist in the quantities predicted or
estimated.
With respect to the forward-looking statements
contained in this news release, Blackbird has assessed material
factors and made assumptions regarding, among other things: future
commodity prices and currency exchange rates, including consistency
of future oil, NGLs and natural gas prices with current commodity
price forecasts; the Company's continued ability to obtain
qualified staff and equipment in a timely and cost-efficient
manner; infrastructure and facility design concepts that have been
applied by the Company elsewhere in its Pipestone / Elmworth
Project may be successfully applied to the properties; the
predictability of future results based on past and current
experience; the predictability and consistency of the legislative
and regulatory regime governing royalties, taxes, environmental
matters and oil and gas operations, both provincially and
federally; the Company's ability to market production of oil, NGLs
and natural gas successfully to customers; the timing and success
of drilling and completion activities (and the extent to which the
results thereof meet expectations); the Company's future production
levels and amount of future capital investment, and their
consistency with the Company's current development plans and
budget; future capital expenditure requirements and the sufficiency
thereof to achieve the Company’s objectives; the successful
application of drilling and completion technology and processes;
the applicability of new technologies for recovery and production
of the Company's reserves and other resources, and their ability to
improve capital and operational efficiencies in the future; the
recoverability of the Company's reserves and other resources; the
Company’s ability to economically produce oil and gas from its
properties and the timing and cost to do so; the performance of
both new and existing wells; future cash flows from production;
future sources of funding for the Company's capital program; the
Company's future debt levels; geological and engineering estimates
in respect of the Company's reserves and other resources; the
accuracy of geological and geophysical data and the interpretation
thereof; the geography of the areas in which the Company conducts
exploration and development activities; the timely receipt of
required regulatory approvals; the access, economic, regulatory and
physical limitations to which the Company may be subject from time
to time; the impact of competition on the Company; and the
Company's ability to obtain external financing when required and on
acceptable terms.
The forward-looking statements contained herein
reflect management's current views, but the assessments and
assumptions upon which they are based may prove to be incorrect.
Although Blackbird believes that its underlying assessments and
assumptions are reasonable based on currently available
information, undue reliance should not be placed on forward-looking
statements, which are inherently uncertain, depend upon the
accuracy of such assessments and assumptions, and are subject to
known and unknown risks, uncertainties and other factors, both
general and specific, many of which are beyond the Company's
control, that that may cause actual results or events to differ
materially from those indicated or suggested in the forward-looking
information and statements. Such risks, uncertainties and other
factors are discussed in the Company’s current annual information
form , annual and interim management’s discussion and analysis, and
other documents filed by it from time to time with securities
regulatory authorities in Canada, copies of which are available
electronically on SEDAR at www.sedar.com, and include, but are not
limited to: volatility in market prices and demand for oil, NGLs
and natural gas and hedging activities related thereto; general
economic, business and industry conditions; variance of the
Company's actual capital costs, operating costs and economic
returns from those anticipated; the ability to find, develop or
acquire additional reserves and the availability of the capital or
financing necessary to do so on satisfactory terms; risks related
to the exploration, development and production of oil and natural
gas reserves and resources; negative public perception of oil and
natural gas development and transportation, hydraulic fracturing
and fossil fuels; actions by governmental authorities, including
changes in government regulation, royalties and taxation; potential
legislative and regulatory changes; the rescission, or amendment to
the conditions of, groundwater licenses of the Company; management
of the Company's growth; the ability to successfully identify and
make attractive acquisitions, joint ventures or investments, or
successfully integrate future acquisitions or businesses; the
availability, cost or shortage of rigs, equipment, raw materials,
supplies or qualified personnel; adoption or modification of
climate change legislation by governments; the absence or loss of
key employees; uncertainty associated with estimates of oil, NGLs
and natural gas reserves and resources and the variance of such
estimates from actual future production; dependence upon
compressors, gathering lines, pipelines and other facilities,
certain of which the Company does not control; the ability to
satisfy obligations under the Company's firm commitment
transportation arrangements; the uncertainties related to the
Company's identified drilling locations; the high-risk nature of
successfully stimulating well productivity and drilling for and
producing oil, NGLs and natural gas; operating hazards and
uninsured risks; the possibility that the Company's drilling
activities may encounter sour gas; execution risks associated with
the Company's business plan; failure to acquire or develop
replacement reserves; the concentration of the Company's assets in
the Pipestone / Elmworth Project area; unforeseen title defects;
aboriginal claims; failure to accurately estimate abandonment and
reclamation costs; development and exploratory drilling efforts and
well operations may not be profitable or achieve the targeted
return; horizontal drilling and completion technique risks and
failure of drilling results to meet expectations for reserves or
production; limited intellectual property protection for operating
practices and dependence on employees and contractors; third-party
claims regarding the Company's right to use technology and
equipment; expiry of certain leases for the undeveloped leasehold
acreage in the near future; failure to realize the anticipated
benefits of acquisitions or dispositions; failure of properties
currently held or acquired in the future to produce as projected
and inability to accurately determine reserve and resource
potential, identify liabilities associated with acquired properties
or obtain protection from sellers against such liabilities; changes
in the application, interpretation and enforcement of applicable
laws and regulations; restrictions on drilling intended to protect
certain species of wildlife; potential conflicts of interests;
actual results differing materially from management estimates and
assumptions; seasonality of the Company's activities and the
Canadian oil and gas industry; alternatives to and changing demand
for petroleum products; extensive competition in the Company's
industry; lower oil, NGLs and natural gas prices and higher costs;
failure of 2D and 3D seismic data used by the Company to accurately
identify the presence of oil and natural gas; risks relating to
commodity price hedging instruments; terrorist attacks or armed
conflict; cyber security risks, loss of information and computer
systems; inability to dispose of non-strategic assets on attractive
terms; security deposits required under provincial liability
management programs; reassessment by taxing authorities of the
Company's prior transactions and filings; variations in foreign
exchange rates and interest rates; third-party credit risk
including risk associated with counterparties in risk management
activities related to commodity prices and foreign exchange rates;
sufficiency of insurance policies; potential litigation; variation
in future calculations of non-IFRS measures; sufficiency of
internal controls; breach of agreements by counterparties and
potential enforceability issues in contracts; impact of expansion
into new activities on risk exposure; inability of the Company to
respond quickly to competitive pressures; and the risks related to
the common shares and warrants that are publicly traded. This
list is not exhaustive.
The forward-looking statements contained in this
news release are made as of the date hereof and Blackbird assumes
no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
unless required by applicable securities laws. All
forward-looking statements herein are expressly qualified by this
advisory.
Contingent Resource Advisories
The resource estimates provided herein have been
evaluated by McDaniel & Associates Consultants Ltd.
("McDaniel"), independent qualified reserves evaluator, in
accordance with National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities and the Canadian Oil and Gas
Evaluation Handbook ("COGE Handbook"), effective as of May 1, 2018.
All resource information has been presented on a net basis, which
is the Company's working interest (operating or non-operating)
share after deduction of royalties, plus royalty interests. The
resources have been categorized accordance with the applicable
definitions as set out in the COGE Handbook. The discounted and
undiscounted net present value of future net revenue attributed to
the resources (whether or not risked) do not represent their fair
market value, and there can be no assurance that such value will be
realized.
The estimates of contingent resources provided
herein are estimates only and there is no guarantee that the
estimated contingent resources will be recovered. Actual contingent
resources may be greater or less than the estimates provided in
this news release, and the differences may be material. The
estimates of contingent resources and future net revenue for
individual properties may not reflect the same confidence level as
estimates of contingent resources and future net revenue for all
properties, due to the effects of aggregation. There is no
assurance that the forecast price and cost assumptions applied by
McDaniel in evaluating Blackbird's contingent resources will be
attained and variances could be material. There is uncertainty that
it will be commercially viable to produce any portion of the
contingent resources described herein, or that Blackbird will
produce any portion of the volumes currently classified as
contingent resources.
Oil and Gas Measures
This news release discloses certain production
information on a barrels of oil equivalent ("boe") basis with
natural gas converted to barrels of oil equivalent using a
conversion factor of six thousand cubic feet of gas to one barrel
of oil (6:1). Condensate and other NGLs are converted to boes
at a ratio of 1 bbl:1 bbl. Boes may be misleading, particularly if
used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based
roughly on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the Company's sales point. Although the 6:1
conversion ratio is an industry accepted norm, it is not reflective
of price or market value differentials between product types. Based
on current commodity prices, the value ratio between crude oil and
natural gas is significantly different from the 6:1 energy
equivalency ratio. Accordingly, using a conversion ratio of 6 mcf:1
bbl may be misleading as an indication of value.
THE TSX VENTURE EXCHANGE INC. HAS
NEITHER APPROVED NOR DISAPPROVED THE CONTENTS OF THIS PRESS
RELEASE. Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this press release.
A photo accompanying this announcement is available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/197c8758-d4d3-4b06-9243-53f51287d5ce
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