Excelsior Announces Independent Resource Estimates and Confirms Commercial Potential at Hangingstone
July 29 2008 - 7:42PM
Marketwired Canada
Excelsior Energy Limited (TSX VENTURE:ELE) ("Excelsior" or "the Company") is
pleased to announce the completion of an updated independent evaluation of
bitumen resources on Excelsior's Hangingstone property ("Hangingstone" or
"Hangingstone Asset"), near Fort McMurray, Alberta. The report was prepared to
provide an independent assessment of the results of a 26 well core drilling
program at Hangingstone completed in March, 2008. Excelsior has a 75% working
interest in 39 contiguous sections of oil sands rights in the Hangingstone
Asset.
The resource estimates were prepared by McDaniel & Associates Consultants
Limited ("McDaniel"). The McDaniel report ("the Report") was prepared using
assumptions and methodology guidelines outlined in the Canadian Oil and Gas
Evaluation Handbook and in accordance with National Instrument 51-101. The
effective date of the evaluation is July 1, 2008. The Report incorporates the
McDaniel price deck as at July 1, 2008 in the forecast price scenario.
The Report represents the first evaluation of the Hangingstone Asset prepared by
McDaniel. Readers are cautioned that the Report cannot be compared to the
Hangingstone evaluation prepared as at December 31, 2007 because of differences
in methodology.
"The discipline of the McDaniel methodology supports the resource base"
commented Robert Bailey, COO and Vice President, Engineering of Excelsior, "The
report confirms the commercial potential of the Hangingstone Asset and provides
a strong base for continued delineation. Excelsior is working towards a 10,000
bopd SAGD demonstration project application at Hangingstone in Q2, 2009."
Discovered and Undiscovered Petroleum Initially-in-Place
McDaniel has recognized best estimate Discovered Petroleum Initially-in-Place of
1.587 billion barrels on the Hangingstone Asset in proximity to well control
(Excelsior working interest share) with a low estimate of 1.107 billion barrels
and a high estimate of 2.072 billion barrels. The area included in Discovered
Petroleum Initially-in-Place assignments, based on well control, amounts to
approximately 50% of Hangingstone gross lands. Generally, McDaniel's methodology
for the assignment of Discovered Petroleum Initially-In-Place requires a minimum
delineation density of one well per square mile.
McDaniel has determined additional prospectivity in an Undiscovered Petroleum
Initially-in-Place assignment. The Report assigns 3.041 billion barrels of best
estimate Discovered and Undiscovered Petroleum Initially-in-Place to the
Hangingstone Asset (Excelsior working interest share) with a low estimate of
2.281 billion barrels and a high estimate of 3.801 billion barrels.
Contingent Resources
The Report assigned Contingent Resources to Hangingstone based on the well
delineation density achieved as of March, 2008. Best estimate Contingent
Resources were estimated at 119.0 MMbbls (Excelsior working interest share
before royalty); low estimate Contingent Resources were estimated at 83.7 MMbbls
and high estimate Contingent Resources were estimated at 165.9 MMbbls. The
assigned Contingent Resources are further categorized as economic.
The Report estimated that Excelsior's best estimate Contingent Resources would
generate $1.360 billion of future net revenue with a net present value before
income tax discounted at 8% ("NPV8") of $283 million after deduction of $1.988
billion in future capital requirements and abandonment costs of $37.8 million.
McDaniel calculates Contingent Resources based on that portion of Discovered
Petroleum-Initially-in-Place that meets the requisite minimum qualitative and
quantitative criteria to be exploited using conventional SAGD technology.
The Contingent Resource volumes have not been classified as Reserves at this
time pending further delineation drilling, development planning and regulatory
applications.
Share Value based on Contingent Resource and Common Shares Outstanding
On a per share basis the estimated NPV8 for best estimate Contingent Resources
equates to $2.60 per Excelsior common share outstanding, the estimated NPV8 for
the high estimate Contingent Resources equates to $5.62 per Excelsior common
share outstanding. The estimated NPV8 for the low estimate Contingent Resources
equates to $0.87 per Excelsior common share outstanding. There are approximately
108.8 million Excelsior common shares outstanding.
Prospective Resources
McDaniel also assigned Prospective Resources to Hangingstone. Best estimate
Prospective Resources were estimated at 86.0 MMbbls (Excelsior working interest
share before royalty); low estimate Prospective Resources were estimated at 55.1
MMbbls and high estimate Prospective Resources were estimated at 110.7 MMbbls.
The Report estimated that Excelsior's best estimate Prospective Resources would
generate $0.841 billion of future net revenue with an NPV8 of $126 million after
deduction of $1.766 billion in future capital requirements and abandonment costs
of $40.2 million.
McDaniel calculates Prospective Resources based on that portion of Undiscovered
Petroleum-Initially-in-Place that is expected to meet the requisite minimum
qualitative and quantitative criteria to be exploited using conventional SAGD
technology.
The Prospective Resource volumes have not been classified as Contingent
Resources at this time pending additional delineation drilling.
Incremental Share Value based on Prospective Resource and Common Shares Outstanding
On a per share basis, the estimated NPV8 for best estimate Prospective Resources
equates to $1.16 per Excelsior common share outstanding, the estimated NPV8 for
the high estimate Prospective Resources equates to $2.28 per Excelsior common
share outstanding. The estimated NPV8 for the low estimate Prospective Resources
equates to $(0.13) per Excelsior common share outstanding. There are
approximately 108.8 million Excelsior common shares outstanding.
Summary Tables
----------------------------------------------------------------------------
Summary of Discovered and Undiscovered
Petroleum Initially-in-Place
Hangingstone, Gross Company Share
McDaniel & Associates - July 1, 2008
(Billions of barrels)
----------------------------------------------------------------------------
Low Best High
Estimate Estimate Estimate
----------------------------------------------------------------------------
Discovered Petroleum
Initially-in-Place 1.107 1.587 2.072
----------------------------------------------------------------------------
Discovered and Undiscovered
Petroleum Initially-in- Place 2.281 3.041 3.801
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Summary of Contingent and Prospective Resources
Hangingstone, Gross Company Share
McDaniel & Associates - July 1, 2008
(Millions of barrels)
----------------------------------------------------------------------------
Low Best High
Estimate Estimate Estimate
----------------------------------------------------------------------------
Contingent Resources 83.7 119.0 165.9
----------------------------------------------------------------------------
Prospective Resources 55.1 86.0 110.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Summary of Net Present Value Before Income Tax
Hangingstone, McDaniel & Associates - July 1, 2008
Contingent Resources - Forecast Price
----------------------------------------------------------------------------
Discount at 0% Discount at 8% Discount at 10%
----------------------------------------------------------------------------
Millions $ Per Millions $ Per Millions $ Per
of $ Share of $ Share of $ Share
----------------------------------------------------------------------------
Low Est. 796 7.32 95 0.87 33 0.30
----------------------------------------------------------------------------
Best Est. 1,360 12.50 283 2.60 178 1.64
----------------------------------------------------------------------------
High Est. 2,448 22.50 612 5.62 438 4.02
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Summary of Net Present Value Before Income Tax
Hangingstone, McDaniel & Associates - July 1, 2008
Prospective Resources - Forecast Price
----------------------------------------------------------------------------
Discount at 0% Discount at 8% Discount at 10%
----------------------------------------------------------------------------
Millions $ Per Millions $ Per Millions $ Per
of $ Share of $ Share of $ Share
----------------------------------------------------------------------------
Low Est. 288 2.65 (14) (0.13) (34) (0.31)
----------------------------------------------------------------------------
Best Est. 841 7.73 126 1.16 70 0.64
----------------------------------------------------------------------------
High Est. 1,249 11.48 248 2.28 164 1.51
----------------------------------------------------------------------------
Definitions:
1) Discovered Petroleum Initially-in-Place
- Defined as that quantity of petroleum that is estimated, as of a given date,
to be contained in known accumulations prior to production. The recoverable
portion of Discovered Petroleum Initially-in-Place includes production,
reserves, and contingent resources; the remainder of the volume is
unrecoverable.
2) Undiscovered Petroleum Initially-in-Place
- Defined as that quantity of petroleum that is estimated, on a given date, to
be contained in accumulations yet to be discovered. The recoverable portion of
Undiscovered Petroleum-Initially-in-Place is referred to as Prospective
Resources; the remainder is classified as unrecoverable.
3) Contingent Resource
- Defined 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 which are not currently considered to be
commercially recoverable due to one or more contingencies. Economic contingent
resources are those contingent resources that are currently economically
recoverable.
4) Prospective Resource
- Defined as those quantities of petroleum estimated, as of a given date, to be
potentially recoverable from undiscovered accumulations by application of future
development projects. Prospective resources have both an associated chance of
discovery and a chance of development.
5) Low Estimate
- Defined as a conservative estimate of the quantity that will actually be
recovered from the accumulation. If probabilistic methods are used, this term
reflects P90 confidence level.
6) Best Estimate
- Defined as the best estimate of the quantity that will actually be recovered
from the accumulation. If probabilistic methods are used this term is a measure
of central tendency of the uncertainty distribution (P50).
7) High Estimate
- Defined as an optimistic estimate of the quantity that will actually be
recovered from the accumulation. If probabilistic methods are used the term
reflects a P10 confidence level.
About Excelsior Energy
Excelsior is active in oil sands exploration and appraisal in the Hangingstone
and West Surmont areas near Fort McMurray, Alberta. Excelsior holds a 75%
working interest in 39 contiguous sections at Hangingstone and will own a 75%
working interest in an additional 19 contiguous sections at West Surmont upon
completion of its farm-in obligations. The Company also holds minor interests in
gas production in Alberta.
The Company strategy is to capture oil and gas appraisal and development
opportunities where we can leverage Management's diverse international
experience and field development expertise. This includes heavy oil reservoir
engineering and development of complex fields. The scale of the oil sands
resource opportunity in Alberta complements Excelsior's international portfolio
and strategy.
Estimations of reserves and future net revenue discussed in this press release
constitute forward looking statements. See "Forward Looking Statements" below.
Forward Looking Statements: This press release contains forward-looking
statements. Management's assessment of future plans and operations, expected
production levels, operating costs, capital expenditures, the nature of capital
expenditures, methods of financing capital expenditures, future engineering
reports and the timing of increases in production may constitute forward-looking
statements under applicable securities laws and necessarily involve risks
including, without limitation, risks associated with oil and gas exploration,
development, exploitation, production, marketing and transportation, loss of
markets, volatility of commodity prices, currency fluctuations, imprecision of
reserve estimates, environmental risks, competition from other producers,
inability to retain drilling rigs and other services, incorrect assessment of
the value of acquisitions, failure to realize the anticipated benefits of
acquisitions, delays resulting from or inability to obtain required regulatory
approvals and ability to access sufficient capital from internal and external
sources. As a consequence, the Company's actual results may differ materially
from those expressed in, or implied by, the forward-looking statements. Readers
are cautioned that the foregoing list of factors is not exhaustive. Additional
information on these and other factors that could effect the Company's
operations and financial results are included in reports on file with Canadian
securities regulatory authorities and may be accessed through the SEDAR website
(www.sedar.com). Furthermore, the forward looking statements contained in this
press release are made as at the date of this press release and the Company does
not undertake any obligation to update publicly or to revise any of the included
forward looking statements, whether as a result of new information, future
events or otherwise, except as may be required by applicable securities laws.
The reserves and future net revenue in this press release represent estimates
only. The present value of estimated future net cash flows and the share value
based on the net present value referred to herein should not be construed as the
current market value of estimated crude oil and natural gas reserves
attributable to the Company's properties. Resources do not constitute, and
should not be confused with, reserves. No bitumen reserves have been recovered
within any of the Company's project areas and there is no assurance that any
commercial oil sands projects will be developed. Estimates of Excelsior's
in-place bitumen "Discovered Resources", "Undiscovered Resources", "Contingent
Resources" and "Prospective Resources" are forward-looking statements. Further
classification is dependent on, among other things, additional feasibility
studies and pilot testing and are inherently uncertain and are generally
considered more uncertain than estimates of reserves. Future estimates of
recoverable resources and actual recoverable resources will differ and may
differ materially from the estimate of in-place Discovered Resources or other
resources. The commercial viability of discovered and undiscovered resources is
affected by numerous factors which are beyond the Company's control and which
cannot be predicted, such as the potential for further financing, environmental,
permitting, legal, title, taxation, socio-political, marketing or other relevant
issues.
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