Razor Energy Corp. (“Razor” or the “Company”) (TSXV: RZE) is
pleased to provide a summary of its 2019 year-end reserves
evaluation.
The highlights and reserves summary below set
forth Razor’s gross reserves as at December 31, 2019, as evaluated
by Sproule Associates Limited (“Sproule”), qualified reserves
evaluators, in an independent report dated February 24, 2020 (the
“Sproule Report”). The figures in the following tables have
been prepared in accordance with the standards contained in the
Canadian Oil and Gas Evaluation Handbook (the “COGEH”) and the
reserve definitions contained in National Instrument 51-101 –
Standards of Disclosure for Oil and Gas Activities (“NI 51-101”).
Additional reserve information as required under NI 51-101 will be
included in the Company’s Annual Information Form which will be
filed on SEDAR on or before March 31, 2020.
Razor's 2019 annual audited consolidated
financial statements have not been completed. Certain financial and
operating information included in this news release are based on
management's estimates only and are subject to audit and may be
subject to change upon completion of the Company’s annual audited
consolidated financial statements. See “Reader Advisories –
Unaudited Financial Information”.
HIGHLIGHTS
- Proved Developed Producing (“PDP”)
reserves value discounted at 10% (“NPV10”) before tax is $116.8
million, or $2.37 per share net asset value (details below).
- PDP reserve volumes were 11,144
Mboe (85% oil and liquids), which represents a decrease of 9% over
year-end 2018. Razor has taken a rigorous and disciplined
approach to high-grading well reactivations, balancing economics
and value preservation. This proactive approach led to a
reserves category change in respect of 1,413 Mboe from PDP to
Proved Developed Non-Producing (a category which increased by 86%
over year-end 2018), which was the primary reason for the reduction
of PDP volumes. As commodity prices improve, these wells will
be turned on production and moved back to the PDP reserves
category.
- Total Proved (“1P”) reserves were
16,258 Mboe, which represents an increase of 6% over year-end
2018.
- Total Proved plus Probable (“2P”)
reserves were 20,750 Mboe, which represents an increase of 3% over
year-end 2018.
- The Company’s Reserve Life Index(2)
is 6.6 years for PDP, 9.6 years for 1P and 12.2 years for 2P
reserves based on December 2019 field-reported production of 4,654
boepd.
- Razor’s reserves replacement(2) was
126% for PDP, 162% of 1P and 196% of 2P based on total 2019
production of 1,608 MMBoe.
Notes:
(1) |
|
|
Razor’s ADR and IWC programs
(each as defined below) are compliant with the Alberta Energy
Regulator’s rules and regulations, scheduled according to remaining
reserves life, inflated as per the Sproule December 31, 2019 price
forecast and then discounted at 10%. |
(2) |
|
|
“Reserve life index” and “Reserve
replacement” do not have standardized meanings. See “Reader
Advisories - Oil and Gas Metrics” contained in this news
release. |
RESERVES REPORTING BEST
PRACTICE
In October 2019, the Calgary Chapter of the
Society of Petroleum Evaluation Engineers (“SPEE”) and associated
industry professionals updated the COGEH. These updates
clarify and streamline previous guideline recommendations initiated
in 2018 and offer additional guidance regarding Canadian reserves
evaluations.
For the second year in a row, Razor continues to
be an industry leader, alongside Sproule, by incorporating industry
best practice by including all abandonment, decommissioning and
reclamations costs (“ADR) and inactive well costs (“IWC”) into the
Sproule Report.
With respect to ADR Costs, the discounted
year-end 2019 was $32.5 million, an increase of $4.4 million from
year-end 2018 ($28.1 million). This increase is attributable
to integrating ADR costs associated with the acquisition of Little
Rock Resources Ltd. (“Little Rock”).
With respect to IWC Costs, the discounted
year-end 2019 was $28.8 million, an increase of $7.6 million from
year-end 2018 ($21.2 million). This increase is primarily due
to integrating the acquisition of Little Rock.
2019 INDEPENDENT RESERVES
EVALUATION
Sproule carried out an independent reserves
evaluation effective December 31, 2019, which was prepared in
accordance with definitions, standards and procedures contained in
the COGEH and in NI 51-101. The reserves evaluation was based on
Sproule forecast pricing and foreign exchange rates as at December
31, 2019 as outlined herein.
Reserves included herein are stated on a company
gross basis (working interest before deduction of royalties without
the inclusion of any royalty interest) unless otherwise noted.
RESERVES SUMMARY
Summary of Gross Oil and Gas Reserves as of
December 31, 2019(1), (2), (3), (4)
|
Light and MediumCrude Oil |
Heavy Crude Oil |
ConventionalNatural Gas |
Natural GasLiquids |
Barrels of Oil Equivalent |
|
Gross |
Gross |
Gross |
Gross |
Gross |
|
(Mbbl) |
(Mbbl) |
(MMcf) |
(Mbbl) |
(Mboe) |
Proved |
|
|
|
|
|
Developed Producing |
7,029 |
209 |
9,956 |
2,246 |
11,144 |
Developed Non-Producing |
1,859 |
66 |
2,307 |
739 |
3,048 |
Undeveloped |
1,544 |
280 |
629 |
137 |
2,067 |
Total Proved |
10,432 |
555 |
12,893 |
3,122 |
16,258 |
Probable |
2,893 |
127 |
3,683 |
859 |
4,492 |
Total Proved plus Probable |
13,325 |
682 |
16,575 |
3,981 |
20,750 |
Net Present Value of Future Net Revenue Before Income Taxes
Discounted at (% per Year) (M$)
|
0% |
|
5% |
|
10% |
|
15% |
|
20% |
|
Proved |
|
|
|
|
|
Developed Producing |
37,940 |
|
119,200 |
|
116,832 |
|
105,004 |
|
93,921 |
|
Developed Non-Producing |
65,715 |
|
49,791 |
|
39,409 |
|
32,216 |
|
26,992 |
|
Undeveloped |
55,666 |
|
42,705 |
|
33,019 |
|
25,752 |
|
20,226 |
|
Total Proved |
159,322 |
|
211,696 |
|
189,260 |
|
162,972 |
|
141,140 |
|
Probable |
124,635 |
|
77,890 |
|
53,460 |
|
39,056 |
|
29,826 |
|
Total Proved plus Probable |
283,957 |
|
289,587 |
|
242,720 |
|
202,027 |
|
170,966 |
|
Notes:
(1) |
|
|
The tables summarize the data contained in the Sproule Report and
as a result may contain slightly different numbers due to
rounding. |
(2) |
|
|
Gross reserves means the total working interest (operating or
non-operating) share of remaining recoverable reserves owned by
Razor before deductions of royalties payable to others and without
including any royalty interests owned by Razor. |
(3) |
|
|
Based on Sproule's December 31, 2019 escalated price forecast. See
“Summary of Pricing and Inflation Rate Assumptions – Forecast
Prices and Costs”. |
(4) |
|
|
The net present value of future net revenue attributable to the
Company's reserves is stated without provision for interest costs
and general and administrative costs, but after providing for
estimated royalties, production costs, development costs, other
income, future capital expenditures, well abandonment,
decommissioning and reclamation costs, and inactive well
costs. It should not be assumed that the undiscounted or
discounted net present value of future net revenue attributable to
the Company's reserves estimated by Sproule represent the fair
market value of those reserves. Other assumptions and
qualifications relating to costs, prices for future production and
other matters are summarized herein. The recovery and reserve
estimates of the Company's oil, NGL and natural gas reserves
provided herein are estimates only and there is no guarantee that
the estimated reserves will be recovered. Actual reserves may be
greater than or less than the estimates provided herein. |
NET ASSET
VALUE(1)
Net Asset Value, including estimated December 31,
2019 cash and working capital was:
|
NPV10 (M$) |
Net Asset Value per share(1,2,3) |
Proved Developed Producing |
116,832 |
$2.37 |
Total Proved |
189,260 |
$5.82 |
Proved Plus Probable |
242,720 |
$8.35 |
Notes:
(1) |
|
The estimated Net Asset Values are based on the estimated net
present value of all future net revenue from Razor’s reserves (net
of ADR and IWC costs), before tax, as estimated by Sproule as at
December 31, 2019. All Net Asset Values cited in this press release
are the resulting NPV per reserves category per basic share less
net debt of $66.5 million at December 31, 2019. See “Reader
Advisories - Oil and Gas Metrics” and “Reader Advisories - Non-IFRS
Measures” contained in this news release. |
(2) |
|
Basic shares outstanding of approximately 21.1 million at December
31, 2019. There are no dilutive instruments currently
outstanding. |
(3) |
|
All 2019 financial amounts are unaudited. See “Reader
Advisories – Unaudited Financial Information”. |
Summary of Pricing and Inflation Rate
Assumptions – Forecast Prices and Costs
The forecast cost and price assumptions assume
increases in wellhead selling prices and include inflation with
respect to future operating and capital costs. Crude oil and
natural gas benchmark reference pricing, inflation and exchange
rates utilized by Sproule as at December 31, 2019 were as
follows:
Year |
Exchange Rate(CAD/USD) |
WTI CushingOklahoma 40
API(USD/bbl) |
Canadian LightSweet 40
API(CAD/bbl) |
Hardisty BowRiver25
API(CAD/bbl) |
Natural Gas AECO(CAD/mmbtu) |
|
|
|
|
|
|
2020 |
0.76 |
61.00 |
73.84 |
61.29 |
2.04 |
2021 |
0.77 |
65.00 |
78.51 |
64.77 |
2.27 |
2022 |
0.80 |
67.00 |
78.73 |
64.55 |
2.81 |
2023 |
0.80 |
68.34 |
80.30 |
65.85 |
2.89 |
2024 |
0.80 |
69.71 |
81.91 |
67.16 |
2.98 |
2025 |
0.80 |
71.10 |
83.54 |
68.51 |
3.06 |
2026 |
0.80 |
72.52 |
85.21 |
69.88 |
3.15 |
2027 |
0.80 |
73.97 |
86.92 |
71.27 |
3.24 |
2028+ |
0.80 |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
Reconciliation of Company Gross Reserves
by Principal Product Type(1), (2)
The following table sets forth the
reconciliation of the Company’s reserves at Forecast Prices and
Costs:
|
Light and Medium Crude Oil |
Heavy Oil |
Factors |
GrossProvedDevelopedProducing(Mbbl) |
GrossProved(Mbbl) |
Gross Proved +Probable(Mbbl) |
Gross ProvedDevelopedProducing(Mbbl) |
Gross Proved(Mbbl) |
Gross Proved +
Probable(Mbbl) |
|
|
|
|
|
|
|
December 31, 2018 |
8,363 |
10,881 |
14,291 |
- |
- |
- |
Acquisitions |
666 |
1,099 |
1,318 |
269 |
614 |
741 |
Category Change |
333 |
36 |
27 |
- |
- |
- |
Disposition |
(1) |
(1) |
(1) |
- |
- |
- |
Extensions/Infill Drilling |
- |
- |
- |
- |
- |
- |
Economic Factors |
(153) |
(232) |
(258) |
- |
- |
- |
Technical Revision |
(1,247) |
(418) |
(1,120) |
- |
- |
- |
Working Interest Adj.Production |
-(932) |
-(932) |
- (932) |
-(60) |
-(60) |
-(60) |
December 31, 2019 |
7,029 |
10,432 |
13,325 |
209 |
555 |
682 |
|
Natural Gas Liquids |
Conventional Natural Gas |
Factors |
GrossProvedDevelopedProducing(Mbbl) |
GrossProved(Mbbl) |
Gross Proved +Probable(Mbbl) |
Gross ProvedDevelopedProducing(MMcf) |
Gross Proved(Mmcf) |
Gross Proved+ Probable(Mmcf) |
|
|
|
|
|
|
|
December 31, 2018 |
2,550 |
3,008 |
3,949 |
7,682 |
9,054 |
11,898 |
Acquisitions |
56 |
62 |
77 |
3,863 |
4,277 |
5,367 |
Category Change |
38 |
48 |
58 |
143 |
161 |
189 |
Disposition |
- |
- |
- |
- |
- |
- |
Extensions/Infill Drilling |
- |
- |
- |
- |
- |
- |
Economic Factors |
(62) |
(92) |
(106) |
(239) |
(322) |
(374) |
Technical Revision |
(5) |
427 |
333 |
219 |
1,435 |
1,209 |
Working Interest Adj.Production |
-(331) |
-(331) |
- (331) |
-(1,713) |
-(1,713) |
-(1,713) |
December 31, 2019 |
2,246 |
3,122 |
3,981 |
9,956 |
12,892 |
16,575 |
|
Barrels of Oil Equivalent |
Factors |
GrossProvedDevelopedProducing(Mboe) |
GrossProved(Mboe) |
Gross Proved +Probable(Mboe) |
|
|
|
|
December 31, 2018 |
12,194 |
15,397 |
20,223 |
Acquisitions |
1,634 |
2,488 |
3,031 |
Category Change |
394 |
111 |
116 |
Disposition |
- |
- |
(1) |
Extensions/Infill Drilling |
- |
- |
- |
Economic Factors |
(255) |
(378) |
(426) |
Technical Revision |
(1,215) |
248 |
(585) |
Working Interest Adj.Production |
-(1,608) |
-(1,608) |
- (1,608) |
December 31, 2019 |
11,144 |
16,258 |
20,750 |
Notes:
(1)(2) |
The tables summarize the data
contained in the Sproule Report and as a result may contain
slightly different numbers due to rounding.Conventional Natural Gas
includes associated and non-associated gas. |
Future Development Costs
The following table sets forth development costs
deducted in the estimation of Razor’s future net revenue
attributable to the reserve categories noted below:
|
Forecast Prices and Costs (M$) |
Year |
Total Proved Reserves |
Proved plus Probable |
|
|
|
2020 |
9,152 |
9,738 |
2021 |
19,154 |
19,154 |
2022 |
19,870 |
36,083 |
Thereafter |
2,520 |
2,520 |
Total Undiscounted |
50,696 |
67,495 |
Total Discounted at 10% |
43,183 |
56,893 |
The future development costs are estimates of
capital expenditures required in the future for Razor to convert
proved developed non-producing reserves and probable reserves to
proved developed producing reserves. The undiscounted future
development costs are $50.7 million for proved reserves and $67.5
million for proved plus probable reserves (in each case based on
forecast prices and costs).
2019 CAPITAL EXPENDITURES
Razor spent $4.4 million on reactivations and
optimizations during the year ended December 31, 2019. This total
excludes facilities and pipeline maintenance of $2.6 million and
capital expenditures associated with power generation of $4.5
million which was offset with government grants of $5.5
million.
ABOUT RAZORRazor is a
publicly-traded junior oil and gas development and production
company headquartered in Calgary, Alberta, concentrated on
acquiring, and subsequently enhancing, producing oil and gas
properties primarily in Alberta. The Company is led by experienced
management and a strong, committed Board of Directors, with a
long-term vision of growth, focused on efficiency and cost control
in all areas of the business. Razor currently trades on TSX Venture
Exchange under the ticker “RZE”.For additional information
please contact:
Doug BaileyPresident and Chief Executive Officer |
OR |
Kevin BraunChief Financial Officer |
|
|
|
Razor Energy Corp.800, 500-5th Ave SWCalgary, Alberta T2P
3L5Telephone: (403)
262-0242www.razor-energy.com |
|
Alliance Capital PartnersGordon
Aldcornwww.alliancecapitalpartners.ca403-618-6507 |
READER ADVISORIES
Forward-Looking Statements.
Certain information included in this press release constitutes
forward-looking information under applicable securities
legislation. Forward-looking information typically contains
statements with words such as “anticipate”, “believe”, “expect”,
“plan”, “intend”, “estimate”, “propose”, “project” or similar words
suggesting future outcomes or statements regarding an outlook.
Forward-looking information in this press release may include but
is not limited to: Razor’s business strategy, objectives, strength
and focus; the ability of the Company to achieve drilling success
consistent with management’s expectations; and future development
costs associated with oil and gas reserves. Statements relating to
“reserves” are also deemed to be forward-looking statements, as
they involve the implied assessment, based on certain estimates and
assumptions, that the reserves described exist in the quantities
predicted or estimated and that the reserves can be profitably
produced in the future.
The forward-looking statements contained in this
press release are based on certain key expectations and assumptions
made by Razor, including expectations and assumptions concerning
the success of future drilling, development, completion and
reactivation activities, the performance of existing wells, the
performance of new wells, the availability and performance of
facilities and pipelines, the geological characteristics of Razor's
properties, the successful application of drilling, completion and
seismic technology, prevailing weather and break-up conditions,
commodity prices, price volatility, price differentials and the
actual prices received for the Company’s products, royalty regimes
and exchange rates, the application of regulatory and licensing
requirements, the availability of capital, labour and services, the
creditworthiness of industry partners and Razor’s ability to
acquire additional assets.
Although Razor believes that the expectations
and assumptions on which the forward-looking statements are based
are reasonable, undue reliance should not be placed on the
forward-looking statements because Razor can give no assurance that
they will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number
of factors and risks. These include, but are not limited to, risks
associated with the oil and gas industry and geothermal electricity
projects in general (e.g., operational risks in development,
exploration and production; variability in geothermal resources;
the uncertainty of reserve estimates; the uncertainty of estimates
and projections relating to production, costs and expenses; and
health, safety and environmental risks), constraint in the
availability of services, electricity and commodity price and
exchange rate fluctuations, changes in legislation affecting the
oil and gas and geothermal industries, regulatory and political
risks, adverse weather or break-up conditions and uncertainties
resulting from potential delays or changes in plans with respect to
exploration or development projects or capital expenditures. These
and other risks are set out in more detail in Razor’s annual
information form for the year ended December 31, 2018 which is
available on SEDAR at www.sedar.com.
The forward-looking information contained in
this press release is made as of the date hereof and Razor
undertakes no obligation to update publicly or revise any
forward-looking information, whether as a result of new
information, future events or otherwise, unless required by
applicable securities laws. The forward-looking information
contained in this press release is expressly qualified by this
cautionary statement.
This press release contains future-oriented
financial information and financial outlook information
(collectively, “FOFI”) about Razor’s prospective results of
operations, production, net debt and net asset value, all of which
are subject to the same assumptions, risk factors, limitations, and
qualifications as set forth in the above paragraphs. FOFI contained
in this document was approved by management as of the date of this
document and was provided for the purpose of providing further
information about Razor’s future business operations. Razor
disclaims any intention or obligation to update or revise any FOFI
contained in this document, whether as a result of new information,
future events or otherwise, unless required pursuant to applicable
law. Readers are cautioned that the FOFI contained in this document
should not be used for purposes other than for which it is
disclosed herein.
Oil and Gas Metrics. This press
release contains a number of oil and gas metrics, including “future
development costs”, “net asset value”, “reserves life index” and
“reserve replacement” which do not have standardized meanings or
standard methods of calculation and therefore such measures may not
be comparable to similar measures used by other companies. Such
metrics have been included herein to provide readers with
additional measures to evaluate the Company's performance; however,
such measures are not reliable indicators of the future performance
of the Company and future performance may not compare to the
performance in previous periods. Future development costs are
calculated as the sum of development capital plus the change in
future development costs for the period. Net asset value for each
reserves category is based on present value of future net revenues
discounted at 10% before tax, net of net debt as at December 31,
2019, divided by the number of Razor shares outstanding as at
December 31, 2019. Reserves life index is calculated as total
Company share reserves divided by annual production. Reserve
replacement is calculated by dividing reserve volume additions by
annual production and expressed as a percentage.
Boe Disclosure. The term
barrels of oil equivalent (“boe”) may be misleading, particularly
if used in isolation. A BOE conversion ratio of six thousand cubic
feet of natural gas to barrels of oil equivalence is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. All BOE conversions in the report are derived from
converting gas to oil in the ratio mix of six thousand cubic feet
of gas to one barrel of oil.
Unaudited Financial
Information. Certain financial and operating
information included in this press release for the year
ended December 31, 2019, including net asset value and net
debt, are based on estimated unaudited financial results for the
year then ended, and are subject to the same limitations as
discussed under Forward Looking Information set out above. These
estimated amounts may change upon the completion of audited
financial statements for the year ended December 31,
2019 and changes could be material.
Non-IFRS Measures. This press
release contains the term “net debt”, which does not have a
standardized meaning prescribed by International Financial
Reporting Standards (“IFRS”) and therefore may not be comparable
with the calculation of similar measures by other companies. Net
debt is calculated as long-term debt less working capital (or plus
working capital deficiency), with working capital excluding
mark-to-market risk management contracts. Management believes net
debt is a useful supplemental measure of the total amount of
current and long term debt of the Company.
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 news release.
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