TSX-V: CWV: Crown Point Energy Inc. (“Crown
Point”, the
“Company”,
"
we" or "
our"
)
today announced certain reserve information for the year ended
December 31, 2019. All dollar figures are expressed in United
States dollars ("
USD" or "
US$")
unless otherwise stated, and "
MMUS$" means
millions of USD.
Gaffney, Cline & Associates Inc.
(“Gaffney Cline”), an independent qualified
reserves auditor, audited the oil and natural gas reserves
attributable to all of Crown Point’s properties as at December 31,
2019 based on forecast prices and costs and in accordance with
National Instrument 51-101 ("NI 51-101") and the
Canadian Oil and Gas Evaluation Handbook (the "COGE
Handbook"). Gaffney Cline’s audit report (the "GCA
Report") also presents the estimated net present value of
future net revenue associated with Crown Point's reserves. A
summary of Crown Point’s crude oil, natural gas and natural gas
liquids reserves, as audited by Gaffney Cline, and the associated
net present value of future net revenue associated therewith as at
December 31, 2019 is presented below.
The following table presents, in the aggregate,
the Company's gross and net proved and probable reserves, estimated
using forecast prices and costs, by product type and by barrel of
oil equivalent, as of December 31, 2019.
SUMMARY OF RESERVES AS OF DECEMBER 31,
2019(Forecast Prices & Costs)
|
Light and MediumCrude Oil |
ConventionalNatural Gas |
Natural Gas Liquids |
Total Reserves |
|
|
|
|
|
|
(Mbbl) |
(MMcf) |
(Mbbl) |
MBOE |
Reserves Category(2) |
Gross |
Net |
Gross |
Net |
Gross |
Net |
Gross |
Net |
Proved: |
|
|
|
|
|
|
|
|
Developed Producing |
1,069 |
909 |
5,766 |
4,920 |
12 |
10 |
2,042 |
1,739 |
Developed Non-Producing |
38 |
32 |
218 |
186 |
1 |
0 |
75 |
63 |
Undeveloped |
859 |
730 |
1,212 |
1,038 |
3 |
2 |
1,064 |
905 |
Total Proved |
1,966 |
1,671 |
7,196 |
6,145 |
15 |
13 |
3,181 |
2,708 |
Total Probable |
858 |
730 |
256 |
218 |
0 |
0 |
901 |
767 |
Total Proved plus
Probable |
2,824 |
2,401 |
7,451 |
6,363 |
16 |
13 |
4,081 |
3,475 |
The following table discloses, in the aggregate,
the net present value of the Company's future net revenue
attributable to the reserves categories in the table above,
estimated using forecast prices and costs, before deducting future
income tax expenses, and calculated without discount and using
discount rates of 5%, 10%, 15% and 20%.
SUMMARY OF NET PRESENT VALUE OF FUTURE
NET REVENUE AS OF DECEMBER 31, 2019 (Forecast Prices &
Costs)
|
Net Present
Values of Future Net Revenue Before Income Taxes(1) |
|
|
|
Discounted
at (%/year) |
|
|
Reserves Category(2) |
0% |
5% |
10% |
15% |
20% |
MMUS$ |
MMUS$ |
MMUS$ |
MMUS$ |
MMUS$ |
Proved: |
|
|
|
|
|
Developed Producing |
29.1 |
|
27.1 |
|
25.4 |
|
23.9 |
|
22.6 |
|
Developed Non-Producing |
1.5 |
|
1.4 |
|
1.3 |
|
1.2 |
|
1.1 |
|
Undeveloped |
28.0 |
|
24.2 |
|
21.2 |
|
18.8 |
|
16.8 |
|
Total Proved |
58.6 |
|
52.7 |
|
47.9 |
|
43.8 |
|
40.4 |
|
Total Probable |
31.9 |
|
27.1 |
|
23.3 |
|
20.3 |
|
17.8 |
|
Total Proved plus Probable |
90.5 |
|
79.8 |
|
71.2 |
|
64.1 |
|
58.2 |
|
- The estimated net present values of future net revenues
disclosed do not represent fair market value.
- The definitions of the various categories of reserves are those
set out in NI 51-101 and the COGE Handbook.
The Company's proved plus probable
("2P") reserves (gross) as at December 31, 2019,
as audited by Gaffney Cline, were 4,081 MBOE compared to 9,246 MBOE
as at December 31, 2018, representing a decrease of approximately
56%. The significant decrease is attributable to: the
Company's disposition of a 16.83% working interest in the Rio
Cullen, Las Violetas and La Angostura hydrocarbon exploitation
concessions located in the Tierra del Fuego region of southern
Argentina to its joint venture partners effective 25 April 2019
(the "Disposition"); a significant reduction in
gas prices in the domestic market in Argentina; and the absence of
a drilling campaign in 2019 to replace 2019 oil and gas
production.
The estimated before tax net present value of
the Company's 2P reserves as at December 31, 2019 (discounted at
10%) was $71.2 million, compared with $173.7 million as at December
31, 2018. The significant decrease in the before tax net present
value is attributable to: the Disposition; the material reduction
in domestic market gas prices in Argentina; and the depletion of
the Company's reserves due to production.
Approximately 36% of the Company's before tax
net present value of 2P reserves (discounted at 10%) is categorized
as "developed producing" and the before tax net present value of
future net revenues associated with the Company's total proved
reserves (discounted at 10%) represents approximately 67% of the
Company's before tax net present value of future net revenues
associated with all of the Company's 2P reserves. Crude oil
accounts for approximately 69% of the Company's 2P reserves (gross)
as at December 31, 2019 compared with 62% as at December 31, 2018,
whereas natural gas accounts for approximately 31% of the Company's
2P reserves (gross) as at December 31, 2019 compared with 38% as at
December 31, 2018.
The following table sets forth, for each product
type, the pricing assumptions used by Gaffney Cline in estimating
the reserves data disclosed herein as at December 31, 2019. The
pricing assumptions were provided by Crown Point to Gaffney Cline,
and represent Crown Point's forecast price assumptions as at the
effective date of the GCA Report.
SUMMARY OF PRICING AND INFLATION RATE
ASSUMPTIONSAS OF DECEMBER 31, 2019 (Forecast
Prices & Costs)
Year |
|
Brent CrudeOil PriceUS$/bbl |
|
TDF CrudeOil Price(1)US$/bbl |
|
TDF
NGL PriceUS$/bbl |
|
TDF(2) Natural Gas
PriceUS$/Mcf |
|
Inflation Rate(3)% / Year |
2020 |
|
65.0 |
|
56.0 |
|
19.7 |
|
2.62 |
|
2 |
2021 |
|
68.0 |
|
59.0 |
|
19.9 |
|
2.72 |
|
2 |
2022 |
|
70.0 |
|
61.0 |
|
20.1 |
|
3.65 |
|
2 |
2023 |
|
71.4 |
|
62.4 |
|
20.3 |
|
3.74 |
|
2 |
2024 |
|
72.8 |
|
63.8 |
|
20.5 |
|
3.87 |
|
2 |
2025 |
|
74.3 |
|
65.3 |
|
20.7 |
|
3.86 |
|
2 |
2026 |
|
75.8 |
|
66.8 |
|
20.9 |
|
3.89 |
|
2 |
Thereafter |
|
2%/year |
|
2%/year |
|
2%/year |
|
2%/year |
|
|
|
|
|
|
|
|
|
|
|
|
|
- Forecast pricing for Tierra del Fuego ("TDF")
crude oil is based on the forecast Brent crude oil benchmark
reference pricing published by Sproule Associates Limited, less a
discount of US$9.00 per bbl.
- Natural gas production from the TDF concessions is sold to
consumers in TDF as well as to mainland Argentina, all of which
receive different prices as set by sales agreements from time to
time. These forecast prices represent a blend of such prices.
- Inflation rates used for forecasting costs.
Further details of the audit of the Company’s
reserves as at December 31, 2019 will be contained in the Company’s
NI 51-101 filings for the year ended December 31, 2019, which will
be filed with Canadian securities regulatory authorities in due
course and will be made available under the Company’s profile at
www.sedar.com and on the Company’s website at
www.crownpointenergy.com.
The GCA Report notes that after the December 31,
2019 effective date of the GCA Report and before its issuance,
Gaffney Cline was made aware of a significant change in the
performance of the SM x-1001well, the main oil producer in the San
Martin field. As previously reported by Crown Point, in late
January 2020 the well started producing large amounts of water with
a notable decline in oil production. The GCA Report states that the
full impact of this development has yet to be assessed, but it is
clear that the reserve volumes reported in the GCA Report and
herein as of December 31, 2019 did not consider this unexpected
performance and therefore may overstate the reserves of the San
Martin field.
The GCA Report also notes that since the
effective date of the GCA Report various events have resulted in a
material downward movement in the current oil price and that, if
current oil prices remain low and the long term oil price outlook
is revised downward, there may be a material revision to the
reserves volumes and net present values presented in the GCA
Report.
About Crown Point
Crown Point Energy Inc. is an international oil
and gas exploration and development company headquartered in
Calgary, Canada, incorporated in Canada, trading on the TSX Venture
Exchange and operating in South America. Crown Point’s exploration
and development activities are focused in two of the largest
producing basins in Argentina, the Austral basin in the province of
Tierra del Fuego and the Neuquén basin, in the province of Mendoza.
Crown Point has a strategy that focuses on establishing a portfolio
of producing properties, plus production enhancement and
exploration opportunities to provide a basis for future growth.
Oil and Gas Advisories
Barrels of oil equivalent
("BOE") may be misleading, particularly if used in
isolation. A BOE conversion ratio of six thousand cubic feet (6
Mcf) to one barrel (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. In addition,
given that the value ratio based on the current price of crude oil
in Argentina as compared to the current price of natural gas in
Argentina is significantly different from the energy equivalency of
6:1, utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
"MBOE" means thousands of barrels of oil
equivalent. “Mcf” means thousand cubic feet. “MMcf”
means million cubic feet. "bbl" means barrel. "Mbbl"
means thousands of barrels. "NGL" means natural gas
liquids.
The reserves estimates contained in this news
release represent our gross and net reserves as at December 31,
2019. Gross reserves are defined under NI 51-101 as our
working interest (operating or non-operating) share before
deduction of royalties and without including any of our royalty
interests. Net reserves are defined under NI 51-101 as our
working interest (operating or non-operating) share after deduction
of royalty obligations, plus our royalty interests in reserves.
It should not be assumed that the present worth of estimated
future net revenues presented in the tables above represents the
fair market value of the reserves. There is no assurance that the
forecast price and cost assumptions will be attained and variances
could be material. The recovery and reserves 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.
All future net revenues are estimated using
forecast prices arising from the anticipated development and
production of our reserves, net of the associated royalties,
operating costs, development costs, and abandonment and reclamation
costs and are stated prior to provision for interest and general
and administrative expenses. Future net revenues have been
presented on a before tax basis.
The estimates of reserves and future net revenue
for individual properties may not reflect the same confidence level
as estimates of reserves and future net revenue for all properties,
due to the effects of aggregation.
Forward Looking Statements
Certain information set forth in this document
is considered forward-looking information, and necessarily involves
risks and uncertainties, certain of which are beyond Crown Point’s
control. In addition, information relating to reserves is
deemed to be forward-looking information, as it involves the
implied assessment, based on certain estimates and assumptions,
that the reserves described can be economically produced in the
future. Such risks include but are not limited to: the risks
that COVID-19 poses to the oil and gas industry generally and our
business in particular, including the risk that the demand for, and
therefore the price of, hydrocarbons will remain depressed for a
significant period of time, the risk that our staff and/or the
staff of third parties on whom we rely to carry out our operations
are unable to perform their duties such that we are unable to
continue our operations in part or in whole, the risk that we are
unable to obtain supplies and other equipment that we need for our
operations due to delays or failures in supply chains, and the risk
that the infrastructure on which we rely to produce, transport and
sell the hydrocarbons we produce suffer intermittent outages or
cease to operate at all, all of which could adversely impact our
ability to operate profitably or at all; risks associated with oil
and gas exploration, development, exploitation, production,
marketing and transportation, including the risk that the
infrastructure on which we rely to produce, transport and sell our
products breaks down and requires parts that are not readily
available or repairs that cannot be made on a timely basis, and
which impair our ability to operate and/or sell our products; risks
associated with operating in Argentina, including risks of changing
government regulations (including the adoption of, amendments to,
or the cancellation of government incentive programs or other laws
and regulations relating to commodity prices, taxation, currency
controls and export restrictions, in each case that may adversely
impact Crown Point), risks that new government initiatives will not
have the consequences the Company believes (including the benefits
to be derived therefrom), expropriation/nationalization of assets,
price controls on commodity prices, inability to enforce contracts
in certain circumstances, the potential for a hyperinflationary
economic environment, the imposition of currency controls, risks
associated with a default on Argentine government debt, and other
economic and political risks; loss of markets and other economic
and industry conditions; volatility of commodity prices; currency
fluctuations; imprecision of reserve estimates; environmental
risks; competition from other producers; inability to retain
drilling services; incorrect assessment of value of acquisitions
and failure to realize the benefits therefrom; delays resulting
from or inability to obtain required regulatory approvals; the lack
of availability of qualified personnel or management; stock market
volatility; inability to access sufficient capital from internal
and external sources; the need to shut-in, flare and/or curtail
production as a result of a lack of infrastructure and/or damage to
existing infrastructure; and economic or industry condition
changes. Actual results, performance or achievements could differ
materially from those expressed in, or implied by, the
forward-looking information and, accordingly, no assurance can be
given that any events anticipated by the forward-looking
information will transpire or occur, or if any of them do so, what
benefits that Crown Point will derive therefrom. With respect to
forward-looking information contained herein, the Company has made
assumptions regarding: the impact that COVID-19 will have on our
operations and the length of time that such impact will persist;
the impact of increasing competition; the general stability of the
economic and political environment in Argentina; the timely receipt
of any required regulatory approvals; the ability of the Company to
obtain qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the costs of obtaining
equipment and personnel to complete the Company’s capital
expenditure program; the ability of the operator of the projects
which the Company has an interest in to operate the field in a
safe, efficient and effective manner; the ability of the Company to
obtain financing on acceptable terms when and if needed; field
production rates and decline rates; the ability to replace and
expand oil and natural gas reserves through acquisition,
development and exploration activities; the timing and costs of
pipeline, storage, transportation and facility repair, construction
and expansion and the ability of the Company to secure adequate
product transportation; future oil and natural gas prices; costs of
operational activities in Argentina; currency, exchange and
interest rates; the regulatory framework regarding royalties,
commodity price controls, currency controls, import/export matters,
taxes and environmental matters in Argentina; and the ability of
the Company to successfully market its oil and natural gas
products. Additional information on these and other factors
that could affect Crown Point are included in reports on file with
Canadian securities regulatory authorities, including under the
heading “Risk Factors” in the Company’s most recent annual
information form, and may be accessed through the SEDAR website
(www.sedar.com). Furthermore, the forward-looking information
contained in this document are made as of the date of this
document, and Crown Point does not undertake any obligation to
update publicly or to revise any of the included forward looking
information, whether as a result of new information, future events
or otherwise, except as may be expressly required by applicable
securities law.
Neither 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 news release.
For inquiries please contact:
Brian Moss
President & CEO
Ph: (403) 232-1150
Crown Point Energy Inc.
bmoss@crownpointenergy.com
Marisa Tormakh
Vice-President, Finance & CFO
Ph: (403) 232-1150
Crown Point Energy Inc.
mtormakh@crownpointenergy.com
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