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
----------------------------------------------------------------------------
(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
----------------------------------------------------------------------------
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".
Contacts: 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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