Razor Energy Corp. (“Razor” or the “Company”) (TSXV: RZE) is
pleased to provide a summary of its 2020 year-end reserves
evaluation and an updated operational outlook.
The highlights and reserves summary below set
forth Razor’s gross reserves at December 31, 2020, as evaluated by
Sproule Associates Limited (“Sproule”), qualified reserves
evaluators, in an independent report dated February 19, 2021 (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 April 8, 2021.
Razor's 2020 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 (“PD”) reserves value discounted at 10% (“NPV10”) before
tax is $75.8 million. Considering year over year commodity price
change the decrease is 3% over year-end 2019. The PD reserves
category is comprised of Proved Developed Producing (“PDP”) and
Proved Developed Non-Producing (“PDNP”) reserves.
- PDP reserves
value discounted at 10% (“NPV10”) before tax is $26.6 million
whereas PDNP reserves value discounted at 10% (“NPV10”) before tax
is $49.2 million.
- PD reserve
volumes are 11,884 Mboe (90% oil and liquids), which represent a
decrease of 17% over year-end 2019. Whereas the PDP reserve volumes
are 7,416 Mboe, a decrease of 33% over year-end 2019, the PDNP
reserve volumes are 4,468 Mboe, an increase of 38% over year-end
2019. This shift in reserve volume categories from PDP to PDNP is a
result of Razor’s disciplined and proactive approach to preserving
value through minimal capital expenditures on repair, maintenance
and workovers during the low commodity price cycle experienced in
2020. As commodity prices improve, the PDNP wells will be
reactivated, placed onstream and moved back to the PDP reserves
category.
- Total Proved
(“1P”) reserves were 13,525 Mboe, which represents a decrease of
17% over year-end 2019.
- Total Proved
plus Probable (“2P”) reserves were 17,319 Mboe, which represents a
decrease of 17% over year-end 2019.
- The Company’s
Reserve Life Index (1) is 5.9 years for PDP, 9.4 years for PD, 10.7
years for 1P and 13.8 years for 2P reserves based on December 2020
field-reported production of 3,450 boepd.
- The
Abandonment, Decommissioning and Reclamation (“ADR”) cost,
discounted at year-end 2020, was $34.2 million, an increase of $1.7
million from year-end 2019 ($32.5 million). The Inactive Well
Compliance (“IWC”) cost, discounted at year-end 2020, was $31.4
million, an increase of $2.6 million from year-end 2019 ($28.8
million).
(1) “Reserve
life index” does not have standardized meaning. See “Reader
Advisories - Oil and Gas Metrics” contained in this news
release.
OPERATIONAL OUTLOOK
Razor is excited with news it shared last week
regarding the multi-year amendment of its existing non-revolving
term loan facility and a new term loan and royalty transaction
which enhances liquidity. The Company remains focused on advancing
its conventional oil and gas base business and reducing
indebtedness while responsibly closing out its proportionate share
of end-of-life inventory.
Razor continues to enjoy its solid reserves
base, comprised of 85% light and medium oil and natural gas
liquids, which has a stable, annual base decline of 12%. In 2020,
the Company took a disciplined and proactive approach to preserving
value through minimal capital expenditures on well repair,
maintenance and workovers in response to low commodity prices due
to the supply/demand imbalance resulting from COVID-19.
With renewed liquidity, and recent upward trend
in commodity prices, Razor has initiated its 46 well reactivation
program which will continue throughout 2021 and into 2022. The
Company anticipates bringing approximately 1,500 boepd onstream
(primarily light oil and natural gas liquids) from this program at
similar declines to its existing reserve base. Once reactivated,
the PDNP reserves from these wells will shift back to the PDP
reserves category.
Currently, Razor’s commitment under the AER’s
ABC program is $3.1 million per year. In addition, the Company has
been granted $3.5 million in aggregate to round five from Alberta’s
Site Rehabilitation Program (“SRP”) through its relationships with
trusted service providers. Razor has spent $655 thousand to date
under the SRP through well abandonments, reclamation and
remediation activities. Since the Company began operations in
February 2017, Razor has spent a cumulative $7.3 million on
end-of-life activities.
Concurrently, Razor’s subsidiary company, FutEra
Power, continues to advance development of its 21 megawatt
co-produced geothermal and natural gas hybrid power project in Swan
Hills. FutEra anticipates construction to commence during the
second quarter of 2021 with plans to deliver power to the grid by
first quarter of 2022.
2020 INDEPENDENT RESERVES
EVALUATION
Sproule carried out an independent reserves
evaluation effective December 31, 2020, which was prepared in
accordance with definitions, standards and procedures contained in
the COGEH and in NI 51-101. The reserves evaluation was based on
Sproule forecast pricing and foreign exchange rates at December 31,
2020 as outlined herein.
Reserves included herein are stated on a company
gross basis (working interest before deduction of royalties without
the inclusion of any royalty interest) unless otherwise noted.
RESERVES SUMMARY
Summary of Gross Oil and Gas Reserves at
December 31, 2020(1), (2), (3), (4)
|
Light and MediumCrude Oil |
Heavy Crude Oil |
ConventionalNatural Gas |
Natural GasLiquids |
Barrels of OilEquivalent |
|
Gross |
Gross |
Gross |
Gross |
Gross |
|
(Mbbl) |
(Mbbl) |
(MMcf) |
(Mbbl) |
(Mboe) |
Proved |
|
|
|
|
|
Developed Producing |
4,940 |
193 |
4,126 |
1,595 |
7,416 |
Developed Non-Producing |
2,891 |
103 |
784 |
1,343 |
4,468 |
Undeveloped |
1,178 |
291 |
445 |
98 |
1,641 |
Total Proved |
9,009 |
587 |
5,355 |
3,036 |
13,525 |
Probable |
2,637 |
144 |
1,377 |
783 |
3,793 |
Total Proved plus Probable |
11,646 |
731 |
6,732 |
3,819 |
17,319 |
Net Present Value of Future Net Revenue
Before Income Taxes Discounted at (% per Year) (M$)
|
0% |
|
5% |
|
10% |
|
15% |
|
20% |
|
Proved |
|
|
|
|
|
Developed Producing |
-109,463 |
|
7,172 |
|
26,553 |
|
29,075 |
|
28,079 |
|
Developed Non-Producing |
84,169 |
|
62,960 |
|
49,199 |
|
39,730 |
|
32,904 |
|
Undeveloped |
32,005 |
|
25,137 |
|
19,756 |
|
15,568 |
|
12,284 |
|
Total Proved |
6,712 |
|
95,269 |
|
95,508 |
|
84,372 |
|
73,267 |
|
Probable |
86,027 |
|
54,611 |
|
37,709 |
|
27,525 |
|
20,853 |
|
Total Proved plus Probable |
92,738 |
|
149,880 |
|
133,216 |
|
111,898 |
|
94,120 |
|
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 mean 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, 2020 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 ADR and IWC 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. |
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 |
Gross ProvedDevelopedProducing(Mbbl) |
|
GrossProved(Mbbl) |
|
Gross Proved +Probable
(Mbbl) |
|
Gross ProvedDevelopedProducing(Mbbl) |
|
GrossProved(Mbbl) |
|
Gross Proved+ Probable(Mbbl) |
|
|
|
|
|
|
|
|
December 31, 2019 |
7,029 |
|
10,432 |
|
13,325 |
|
209 |
|
555 |
|
682 |
|
Acquisitions |
258 |
|
303 |
|
379 |
|
- |
|
- |
|
- |
|
Category Change |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Disposition |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Extensions/Infill Drilling |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Economic Factors |
(557 |
) |
(1,260 |
) |
(1,476 |
) |
(22 |
) |
(30 |
) |
(37 |
) |
Technical Revision |
(1,019 |
) |
304 |
|
189 |
|
29 |
|
86 |
|
110 |
|
Production |
(771 |
) |
(771 |
) |
(771 |
) |
(24 |
) |
(24 |
) |
(24 |
) |
December 31, 2020 |
4,940 |
|
9,009 |
|
11,647 |
|
193 |
|
587 |
|
731 |
|
|
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, 2019 |
2,246 |
|
3,122 |
|
3,981 |
|
9,956 |
|
12,892 |
|
16,575 |
|
Acquisitions |
128 |
|
145 |
|
181 |
|
342 |
|
363 |
|
434 |
|
Category Change |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Disposition |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Extensions/Infill Drilling |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Economic Factors |
(177 |
) |
(361 |
) |
(514 |
) |
(452 |
) |
(501 |
) |
(780 |
) |
Technical Revision |
(299 |
|
432 |
|
473 |
|
(4,386 |
) |
(6,003 |
) |
(8,163 |
) |
Production |
(302 |
) |
(302 |
) |
(302 |
) |
(1,335 |
) |
(1,335 |
) |
(1,335 |
) |
December 31, 2020 |
1,595 |
|
3,036 |
|
3,819 |
|
4,126 |
|
5,355 |
|
6,732 |
|
|
Barrels of Oil Equivalent |
|
|
|
|
|
|
|
|
Factors |
Gross ProvedDevelopedProducing(Mboe) |
|
GrossProved(Mboe) |
|
Gross Proved +Probable
(Mboe) |
|
|
|
|
|
December 31, 2019 |
11,144 |
|
16,258 |
|
20,750 |
|
Acquisitions |
442 |
|
508 |
|
633 |
|
Category Change |
- |
|
- |
|
- |
|
Disposition |
- |
|
- |
|
- |
|
Extensions/Infill Drilling |
- |
|
- |
|
- |
|
Economic Factors |
(832 |
) |
(1,744 |
) |
(2,157 |
) |
Technical Revision |
(2,020 |
) |
(178 |
) |
(589 |
) |
Production |
(1,319 |
) |
(1,319 |
) |
(1,319 |
) |
December 31, 2020 |
7,416 |
|
13,525 |
|
17,319 |
|
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) |
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 |
|
|
|
2021 |
12,526 |
24,580 |
2022 |
25,535 |
25,535 |
2023 |
0 |
0 |
Thereafter |
2,525 |
2,525 |
Total Undiscounted |
40,585 |
52,639 |
Total Discounted at 10% |
36,009 |
47,826 |
The future development costs are estimates of
capital expenditures required in the future for Razor to convert
proved developed and undeveloped non-producing plus probable
reserves to proved developed producing reserves. The undiscounted
future development costs are $40.6 million for proved reserves and
$52.6 million for proved plus probable reserves, in each case based
on forecast prices and costs.
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 at December 31, 2020 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 GasAECO(CAD/mmbtu) |
|
|
|
|
|
|
2021 |
0.77 |
46.00 |
54.55 |
40.03 |
2.86 |
2022 |
0.77 |
48.00 |
57.14 |
42.42 |
2.78 |
2023 |
0.77 |
53.00 |
63.64 |
48.39 |
2.69 |
2024 |
0.77 |
54.06 |
64.91 |
49.18 |
2.75 |
2025 |
0.77 |
55.14 |
66.21 |
50.16 |
2.80 |
2026 |
0.77 |
56.24 |
67.53 |
51.17 |
2.86 |
2027 |
0.77 |
57.37 |
68.88 |
52.19 |
2.91 |
2028 |
0.77 |
58.52 |
70.26 |
53.23 |
2.97 |
2029+ |
0.77 |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
2020 CAPITAL EXPENDITURES
Razor spent $237 thousand of capital on
production-add activities during the year ended December 31, 2020.
During 2020, the Company also incurred $538 thousand on end-of-life
abandonment and reclamation activities under the Alberta Energy
Regulator’s (“AER”) Area Based Closure (“ABC”) program prior to the
AER suspending it in mid-2020 for the remainder of the year in
response to low commodity prices.
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”. www.razor-energy.com
Razor also has two other active subsidiaries in
FutEra Power Corp. (“FutEra”) and Blade Energy Services Corp.
(“Blade”).
ABOUT FUTERAFutEra leverages
Alberta’s resource industry innovation and experience to create
transitional power and sustainable infrastructure solutions to
commercial markets and communities, both in Canada and globally.
Currently it is developing a 21 megawatt co-produced geothermal and
natural gas hybrid power project in Swan Hills,
Alberta.www.futerapower.com
ABOUT BLADEOperating in west
central Alberta, Blade’s primary services include fluid hauling,
road maintenance, earth works including well site reclamation and
other oilfield services.www.blade-es.com
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 |
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, 2019 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, 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”, “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. 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,
2020, 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,
2020 and changes could be material.
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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