Crew Energy Inc. (TSX:CR) of Calgary, Alberta ("Crew" or the "Company") is
pleased to announce the results of its independent reserve evaluation for the
year ended December 31, 2012 as prepared by Sproule Associates Ltd. ("Sproule").
2012 HIGHLIGHTS
-- Achieved all-in finding, development and acquisition ("FD&A") costs of
$8.17 per boe on proved plus probable reserves, including changes in
future development costs, resulting in a recycle ratio of 2.7 times;
-- Achieved finding and development ("F&D") costs of $11.71 per boe on
proved plus probable reserves, including changes in future development
costs, resulting in a recycle ratio of 1.9 times;
-- Generated a proved plus probable reserve replacement ratio on production
of 254% and a proven reserve replacement ratio on production of 193%;
-- Proved developed producing reserves increased 50% to 44.7 mmboe after
production of 10.2 mmboe and dispositions of 0.5 mmboe, yielding a
proved producing F&D cost of $13.90 per boe;
-- Proved reserves increased 31% to 85.1 mmboe after production of 10.2
mmboe and dispositions of 3.5 mmboe. Proved reserves per share increased
11%;
-- Proved plus probable reserves increased 28% to 153.0 mmboe after
production of 10.2 mmboe and dispositions of 11.9 mmboe. Proved plus
probable reserves per share increased 11%;
-- Proved plus probable reserves at Crew's Septimus Montney property
increased 44% year over year after production. Average probable
undeveloped Montney natural gas reserves increased to 3.2 bcf per well
from 2.6 bcf per well;
-- Proved plus probable reserves at Crew's Deep Basin liquids rich gas
property increased 55% year over year after production. This increase is
related to the successful 2012 Cardium drilling program and the
continued out performance of the Cardium type curve. Sproule has
assigned average proved plus probable reserves of 1.8 bcf to 98
locations;
-- Proved plus probable reserves at Crew's Princess property increased 7%
year over year after production due to the positive response observed at
Crew's pools under waterflood; and
-- Proved plus probable reserves at Crew's Lloydminster property increased
20% year over year after production as a result of the successful 2012
drilling and recompletion program.
RESERVES
The reserves data set forth below is based upon an independent reserves
assessment and evaluation prepared by Sproule with an effective date of December
31, 2012 (the "Sproule Report"). The following presentation summarizes the
Company's crude oil, natural gas liquids and natural gas reserves and the net
present values before income tax of future net revenue for the Company's
reserves using forecast prices and costs based on the Sproule Report. The
Sproule Report has been prepared in accordance with definitions, standards, and
procedures contained in the COGE Handbook and NI 51-101.
All evaluations and reviews of future net cash flows are stated prior to any
provisions for interest costs or general and administrative costs and after the
deduction of estimated future capital expenditures for wells to which reserves
have been assigned. It should not be assumed that the estimates of future net
revenues presented in the tables below represent the fair market value of the
reserves. There is no assurance that the forecast prices and cost assumptions
will be attained and variances could be material. The recovery and reserve
estimates of our crude oil, natural gas liquids and natural gas reserves
provided herein are estimates only and there is no guarantee that the estimated
reserves will be recovered. Actual crude oil, natural gas and natural gas
liquids reserves may be greater than or less than the estimates provided herein.
Reserves included herein are stated on a company gross basis (working interest
before deduction of royalties without including any royalty interests) unless
noted otherwise. In addition to the detailed information disclosed in this news
release, more detailed information will be included in the Company's Annual
Information Form (the "AIF") which will be filed on the Company's profile at
www.sedar.com in due course.
See "Information Regarding Disclosure on Oil and Gas Reserves and Operational
Information" for additional cautionary language, explanations and discussions
and "Forward Looking Information and Statements" for a statement of principal
assumptions and risks that may apply.
Reserves Summary
In 2012, the Company's total proved plus probable reserves increased to 153.0
mmboe while proved reserves increased to 85.1 mmboe. The year over year growth
in proved plus probable reserves was achieved even when including 10.2 mmboe of
2012 production, 11.9 mmboe of dispositions and 6.3 mmboe of negative
technical revisions. Of the increase in proved plus probable reserves, pool
extensions and improved recoveries accounted for 32.1 mmboe which was
concentrated at Crew's Septimus Montney property in northeast British Columbia
("NEBC") and Deep Basin property in Alberta. Negative technical revisions were
concentrated in the Helmet area in the Cordova Embayment in NEBC and the
Company's CBM assets in Wimborne. In the 2012 year end Sproule Report,
approximately 200 undeveloped locations are booked in Crew's four core areas out
of an inventory of over 2500 potential drilling locations.
Septimus
Proved plus probable reserves increased 44% after production. A majority of this
increase occurred in the proved producing category recognizing better type well
performance as a result of improved completion techniques and facility
enhancements. Average probable undeveloped Montney reserves increased to 3.2 bcf
per well from 2.6 bcf per well in Crew's 2011 year end reserves report. Crew
currently has 40 locations booked at Septimus at an average proved plus probable
reserve booking of 640 mboe per location, with 24 of those locations booked in
the proved undeveloped category. Only 15 of Crew's 234 Montney sections have
been assigned reserves in the 2012 Sproule Report. The Company also has an
outstanding option to purchase an additional 140 sections of Montney rights from
a third party.
Deep Basin
Proved plus probable reserves increased 55% after production. This increase is
related to the successful 2012 Cardium drilling program and the continued out
performance of the previous year's type curve. Crew currently has 98 Cardium
locations booked in the Deep Basin at an average proved plus probable reserve
booking of 442 mboe per location, with 64 of those locations booked in the
proved undeveloped category.
Princess
Proved plus probable reserves increased more than 7% after production to 25.8
mmboe. The high production declines observed during the first quarter of 2012,
due to well interference on certain pools, resulted in negative technical
revisions which were offset by reserve increases due to the positive response
observed at Crew's pools under waterflood. Crew currently has 26 locations
booked (21 horizontal) at Princess at an average proved plus probable reserve
booking of 101 mboe per location, with 21 of those locations booked in the
proved undeveloped category.
Lloydminster
Proved plus probable reserves increased 20% after production, reflecting the
successful 2012 drilling and recompletion program. Crew currently has 41
locations booked at Lloydminster at an average proved plus probable reserve
booking of 48 mboe per location, with 28 of those locations booked in the proved
undeveloped category.
The following table provides summary reserve information based upon the Sproule
Report and using the published Sproule (2012-12-31) price forecast.
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Barrels of
Natural oil
Gas Natural equivalent
Oil (3) Liquids gas (2)
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Gross(1) Gross(1) Gross(1) Gross(1)
(mbbl) (mbbl) (mmcf) (mboe)
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Proved
Producing 11,887 6,422 158,128 44,664
Non-producing 4,282 148 4,369 5,158
Undeveloped 4,449 7,912 137,425 35,265
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Total proved 20,617 14,483 299,922 85,087
Probable 14,074 11,312 255,023 67,889
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Total proved plus probable 34,691 25,794 554,945 152,976
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Notes:
(1) "Gross" reserves means Crew's working interest (operating and non-operating)
share before deduction of royalties and without including any royalty interest
of the Company.
(2) Oil equivalent amounts have been calculated using a conversion rate of six
thousand cubic feet of natural gas to one barrel of oil.
(3) Includes light, medium, and heavy oils. See the Company's AIF for detailed
product type categorization.
(4) May not add due to rounding.
Reserves Values
The estimated before tax future net revenues associated with Crew's reserves
effective December 31, 2012 and based on the Sproule Report and the published
Sproule (2012-12-31) future price forecast are summarized in the following
table:
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(MM$) 0% 5% 10% 15% 20%
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Proved
Producing 954,230 754,762 629,735 544,376 482,432
Non-producing 154,652 125,142 103,941 88,134 75,983
Undeveloped 475,740 275,874 162,800 93,486 48,451
--------------------------------------------------
Total proved 1,584,623 1,155,778 896,475 725,996 606,867
Probable 1,636,656 907,060 581,272 406,645 300,824
--------------------------------------------------
Total proved plus probable 3,221,279 2,062,837 1,477,748 1,132,641 907,691
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Notes:
(1) The estimated future net revenues are stated before deducting future
estimated site restoration costs and are reduced for estimated future
abandonment costs and estimated capital for future development associated with
the reserves.
(2) See the Company's AIF for the after-tax present values of future net revenue
attributed to Crew's reserves.
(3) May not add due to rounding.
Price Forecast
The Sproule (2012-12-31) price forecast is summarized as follows:
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Year
Western Natural
$US/$Cdn Edmonton Canada gas at
Exchange WTI @ light Select AECO/NIT Westcoast
Rate Cushing crude oil (WCS) spot Station 2
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(US$/bbl) (C$/bbl) (C$/bbl)(C$/mmbtu)(C$/mmbtu)
2013 1.001 89.63 84.55 69.33 3.31 3.25
2014 1.001 89.93 89.84 74.57 3.72 3.66
2015 1.001 88.29 88.21 73.21 3.91 3.85
2016 1.001 95.52 95.43 80.17 4.70 4.64
2017 1.001 96.96 96.87 81.37 5.32 5.26
2018 1.001 98.41 98.32 82.59 5.40 5.34
2019 1.001 99.89 99.79 83.83 5.49 5.43
2020 1.001 101.38 101.29 85.08 5.58 5.52
2021 1.001 102.91 102.81 86.36 5.67 5.61
2022 1.001 104.45 104.35 87.66 5.76 5.70
2023 1.001 106.02 105.92 88.97 5.85 5.79
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2023 + 1.001 1.5%/yr 1.5%/yr 1.5%/yr 1.5%/yr 1.5%/yr
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Notes:
(1) Inflation is accounted for at 1.5% per year.
Reserves Reconciliation
The following summary reconciliation of Crew's Gross reserves compares changes
in the Company's reserves as at December 31, 2012 to the reserves as at December
31, 2011 based on the Sproule (2012-12-31) future price forecast.
Oil Oil
(mbbls) NGL's Natural Equivalent
TOTAL PROVED (1) (mbbls) Gas (mmcf) (mboe)
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Opening Balance 19,830 10,139 273,927 75,624
Extensions & Improved Recovery 1,468 5,624 47,122 14,945
Infill Drilling 1,938 1,175 38,157 9,472
Technical Revisions 1,460 (276) (14,227) (1,187)
Discoveries 174 0 0 174
Acquisitions 44 14 2,271 436
Dispositions 0 (1,003) (15,142) (3,526)
Economic Factors (68) (60) (2,999) (627)
Production (4,228) (1,130) (29,186) (10,223)
Closing Balance 20,617 14,483 299,922 85,087
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Oil Oil
(mbbls) NGL's Natural Equivalent
PROVED PLUS PROBABLE (1) (mbbls) Gas (mmcf) (mboe)
----------------------------------------------------------------------------
Opening Balance 35,218 19,676 494,278 137,274
Extensions & Improved Recovery 2,814 9,771 116,922 32,072
Infill Drilling 2,938 1,272 41,304 11,094
Technical Revisions (2,378) (348) (21,373) (6,288)
Discoveries 319 0 0 319
Acquisitions 66 39 7,055 1,281
Dispositions 0 (3,407) (50,718) (11,860)
Economic Factors (58) (78) (3,336) (692)
Production (4,228) (1,130) (29,186) (10,223)
Closing Balance 34,691 25,794 554,945 152,976
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Notes:
(1) Includes light, medium, and heavy oils. See the Company's AIF for detailed
product type categorization.
(2) May not add due to rounding
Capital Program Efficiency
During 2012 Crew's capital expenditures (unaudited), net of dispositions,
resulted in proved plus probable reserve additions of 25.9 mmboe at a net
finding, development and acquisition cost of $8.17 per boe including changes to
future development capital ("FDC"). Proved reserve additions in 2012 were 19.7
mmboe which were added at a net FD&A cost of $15.00 per boe including changes to
FDC.
The efficiency of the Company's capital program for the year ended December 31,
2012 is summarized below.
FD&A costs Excluding FDC Including FDC
Proved + Proved +
($thousands) Proved Probable Proved Probable
E & D Capital Expenditures 258,791 258,791 258,791 258,791
E & D Capital Expenditures -
change in FDC 167,932 168,815
Total E & D capital
expenditures 258,791 258,791 426,723 427,606
Net Acquisition/Disposition (96,557) (96,557) (96,557) (96,557)
Net Acquisition/Disposition -
change in FDC (34,940) (119,180)
Total Net
Acquisition/Disposition (96,557) (96,557) (131,497) (215,737)
Total Capital 162,234 162,234 295,226 211,869
E & D Reserve additions (mboe) 22,777 36,504 22,777 36,504
Net Acquisition/Disposition
reserves (mboe) (3,090) (10,579) (3,090) (10,579)
Total Reserve additions 19,687 25,925 19,687 25,925
Excluding FDC Including FDC
Proved + Proved +
Finding Costs - $ per boe Proved Probable Proved Probable
F&D costs - 2012 11.36 7.09 18.74 11.71
F&D costs - 2011 21.62 12.16 23.51 17.88
F&D costs - Three year average 15.87 9.96 19.63 14.47
FD&A costs - 2012 8.24 6.26 15.00 8.17
FD&A costs - 2011 23.95 12.95 27.63 18.37
FD&A costs - Three year average 17.34 10.79 21.37 15.08
Excluding
Recycle Ratio(4) FDC Including FDC
2012 F&D Proven 1.9 1.2
2012 F&D Proved plus Probable 3.1 1.9
2012 FD&A Proven 2.7 1.5
2012 FD&A Proved plus Probable 3.5 2.7
Total
Proved +
Future Development Capital ($mm) Total Proved Probable
2013 119 160
2014 79 135
2015 80 170
2016 121 187
2017 54 78
Remainder 1 1
Total FDC undiscounted 454 731
Total FDC discounted at 10% 371 593
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Notes:
(1) 2012 figures include information based on estimated unaudited financial
results that may change on the completion of the audited financial statements.
(2) 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 reserve additions for that year.
(3) Crew calculates finding, development and acquisition costs which incorporate
both the costs and associated reserve additions related to acquisitions net of
any dispositions during the year. Since acquisitions and divestitures have had a
significant impact on Crew's annual reserve replacement costs, the Company
believes that FD&A costs provide a meaningful portrayal of Crew's cost
structure.
(4) The 2012 recycle ratio is calculated using the Company's 2012 4th quarter
operating netback of $22.14 per boe (unaudited) which includes commodity related
hedging gains for the period.
Net Asset Value
The following table provides a calculation of Crew's estimated net asset value
at December 31, 2012 based on the estimated future net revenues associated with
Crew's proved plus probable reserves before income tax and discounted at 10% as
presented in the Sproule Report and including Crew's internal assessment of
undeveloped land values.
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5% 10%
Discount Discount
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($ thousands)
Proved plus probable reserves 2,062,837 1,477,748
Undeveloped Land (note 1) 286,726 286,726
Bank debt as at December 31, 2012 (note 2) (242,834) (242,834)
Estimated working capital deficiency as at (48,522) (48,522)
December 31, 2012 (notes 2&3)
Proceeds from dilutive stock options 14,569 14,569
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Net asset value 2,071,736 1,487,687
Diluted Common shares outstanding (thousands) 124,188 124,188
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Net asset value per share $ 16.68 $ 11.98
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Notes:
(1) Based upon an internal evaluation of the fair market value of the Company's
undeveloped land holdings as at December 31, 2012, which evaluation was
completed principally using industry activity levels, third party transactions
and land acquisitions that occurred in proximity to the Company's undeveloped
lands during the past year.
(2) Figures include estimated information based on unaudited financial results
that may change.
(3) Working capital deficiency includes an estimate of the Company's accounts
receivable less accounts payable and accrued liabilities as at December 31,
2012.
CAUTIONARY STATEMENTS
Unaudited financial information
Certain financial and operating information included in this press release for
the quarter and year ended December 31, 2012, including finding and development
costs and net asset value, are based on estimated unaudited financial results
for the quarter and year then ended, and are subject to the same limitations as
discussed under Forward Looking Information set out below. These estimated
amounts may change upon the completion of audited financial statements for the
year ended December 31, 2012 and changes could be material.
Information Regarding Disclosure on Oil and Gas Reserves and Operational Information
Our oil and gas reserves statement for the year ended December 31, 2012, which
will include complete disclosure of our oil and gas reserves and other oil and
gas information in accordance with NI 51-101, will be contained within our
Annual Information Form which will be available on our SEDAR profile at
www.sedar.com. The recovery and reserve estimates contained herein are estimates
only and there is no guarantee that the estimated reserves will be recovered. In
relation to the disclosure of estimates for individual properties, such
estimates may not reflect the same confidence level as estimates of reserves and
future net revenue for all properties, due to the effects of aggregation. The
Company's belief that it will establish additional reserves over time with
conversion of probable undeveloped reserves into proved reserves is a
forward-looking statement and is based on certain assumptions and is subject to
certain risks, as discussed below under the heading "Forward-Looking Information
and Statements".
In relation to the disclosure of net asset value ("NAV"), the NAV table shows
what is normally referred to as a "produce-out" NAV calculation under which the
current value of the Company's reserves would be produced at forecast future
prices and costs and do not necessarily represent a "going concern" value of the
Company. The value is a snapshot in time and is based on various assumptions
including commodity price forecasts and foreign exchange rates that vary over
time. It should not be assumed that the future net revenues estimated by Sproule
represent the fair market value of the reserves, nor should it be assumed that
Crew's internally estimated value of its undeveloped land holdings represent the
fair market value of the lands.
Forward-looking information and statements
This news release contains certain forward-looking information and statements
within the meaning of applicable securities laws. The use of any of the words
"expect", "anticipate", "continue", "estimate", "may", "will", "project",
"should", "believe", "plans", "intends" and similar expressions are intended to
identify forward-looking information or statements. In particular, but without
limiting the foregoing, this news release contains forward-looking information
and statements pertaining to the following: the recognition of significant
additional reserves under the heading "Reserves", the volumes and estimated
value of Crew's oil and gas reserves; the life of Crew's reserves; the volume
and product mix of Crew's oil and gas production; future oil and natural gas
prices and Crew's commodity risk management program; future results from
operations and operating metrics, and future development, exploration,
acquisition and development activities (including drilling plans) and related
production and reserves expectations.
The recovery and reserve estimates of Crew's reserves and resources provided
herein are estimates only and there is no guarantee that the estimated reserves
or resources with be recovered. In addition, forward-looking statements or
information are based on a number of material factors, expectations or
assumptions of Crew which have been used to develop such statements and
information but which may prove to be incorrect. Although Crew believes that the
expectations reflected in such forward-looking statements or information are
reasonable, undue reliance should not be placed on forward-looking statements
because Crew can give no assurance that such expectations will prove to be
correct. In addition to other factors and assumptions which may be identified
herein, assumptions have been made regarding, among other things: that Crew will
continue to conduct its operations in a manner consistent with past operations;
results from drilling and development activities consistent with past
operations; the quality of the reservoirs in which Crew operates and continued
performance from existing wells; the continued and timely development of
infrastructure in areas of new production; the accuracy of the estimates of
Crew's reserve volumes; continued availability of debt and equity financing and
cash flow to fund Crew's current and future plans and expenditures; the impact
of increasing competition; the general stability of the economic and political
environment in which Crew operates; the general continuance of current industry
conditions; the timely receipt of any required regulatory approvals; the ability
of Crew to obtain qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the ability of the operator of the projects
in which Crew has an interest in to operate the field in a safe, efficient and
effective manner; the ability of Crew to obtain financing on acceptable terms;
field production rates and decline rates; the ability to replace and expand oil
and natural gas reserves through acquisition, development and exploration; the
timing and cost of pipeline, storage and facility construction and expansion and
the ability of Crew to secure adequate product transportation; future commodity
prices; currency, exchange and interest rates; regulatory framework regarding
royalties, taxes and environmental matters in the jurisdictions in which Crew
operates; and the ability of Crew to successfully market its oil and natural gas
products.
The forward-looking information and statements included in this news release are
not guarantees of future performance and should not be unduly relied upon. Such
information and statement, including the assumptions made in respect thereof,
involve known and unknown risks, uncertainties and other factors that may cause
actual results or events to defer materially from those anticipated in such
forward-looking information or statements including, without limitation: changes
in commodity prices; changes in the demand for or supply of Crew's products, the
early stage of development of some of the evaluated areas; unanticipated
operating results or production declines; changes in tax or environmental laws,
royalty rates or other regulatory matters; changes in development plans of Crew
or by third party operators of Crew's properties, increased debt levels or debt
service requirements; inaccurate estimation of Crew's oil and gas reserve and
resource volumes; limited, unfavourable or a lack of access to capital markets;
increased costs; a lack of adequate insurance coverage; the impact of
competitors; and certain other risks detailed from time-to-time in Crew's public
disclosure documents, (including, without limitation, those risks identified in
this news release and Crew's Annual Information Form).
The forward-looking information and statements contained in this news release
speak only as of the date of this news release, and Crew does not assume any
obligation to publicly update or revise any of the included forward-looking
statements or information, whether as a result of new information, future events
or otherwise, except as may be required by applicable securities laws.
BOE equivalent
Barrel of oil equivalents or BOEs may be misleading, particularly if used in
isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Given that the value ration
based on the current price of crude oil as compared to natural gas is
significantly different than the energy equivalency of the 6:1 conversion ratio,
utilizing the 6:1 ratio may be misleading as an indication of value.
Crew is a Calgary, Alberta based oil and gas exploration, development and
production company whose shares are traded on The Toronto Stock Exchange under
the trading symbol "CR".
FOR FURTHER INFORMATION PLEASE CONTACT:
Crew Energy Inc.
Dale Shwed
President and C.E.O.
(403) 231-8850
Crew Energy Inc.
John Leach
Senior Vice President and C.F.O.
(403) 231-8859
Crew Energy Inc.
Rob Morgan
Senior Vice President and C.O.O.
(403) 231-2595
www.crewenergy.com
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