CALGARY, March 20, 2013 /CNW/ – Hawk Exploration Ltd. (“Hawk” or the “Corporation”) is pleased to provide an operations update and a summary of its December 31, 2012 reserve information as evaluated by GLJ Petroleum Consultants Ltd. (“GLJ”).
- Increased total proved reserves by 43% from 797 thousand barrels of oil equivalent (“MBoe”) in 2011 to 1,137 MBoe in 2012 and increased total proved plus probable oil reserves by 31% from 1,319 MBoe to 1,725 MBoe;
- Added total proved reserves in 2012 at a finding and development cost of $19.77 per Boe, including future development costs, and added total proved plus probable reserves at a finding and development cost of $16.87 per Boe, including future development costs;
- Achieved a recycle ratio on a proved basis of 1.7 times and on a proved plus probable recycle ratio of 1.9 times based on estimated 2012 operating netback of $32.80 per Boe;
- Replaced 2012 production on a proved basis by 283% and on a proved plus probable basis by 318%;
- Increased undeveloped land holdings to 42,700 net acres mainly in the plains area of eastern Alberta and western Saskatchewan; and
- Continued to increase the oil weighting of the Corporation as oil and liquids reserves comprise 88% of proved plus probable reserve at the end of 2012 from 85% in at the end of 2011.
During the first quarter of 2013, Hawk drilled three (2.0 net) vertical oil wells in the Silverdale area of western Saskatchewan and one (1.0 net) vertical oil well in the Dulwich area of western Saskatchewan. The well at Dulwich (1.0 net) has been cased and completed and is currently producing 35 barrels per day (‘bbl/d”) of heavy oil. At Silverdale, two (1.0 net) wells have been recently completed and are currently producing a combined 50 bbl/d of heavy oil, net to Hawk, while the other one (1.0 net) well at Silverdale is expected to be completed after spring break up in June. Hawk’s current production is approximately 700 Boe/d, with oil comprising 96 percent of total production. Hawk is planning an active drilling program for the second and third quarter of 2013 and expects to drill three (2.5 net) vertical wells and one (1.0 net) horizontal well targeting heavy oil in Hawk’s core area of east central Alberta and western Saskatchewan.
As a follow up to our press release on February 5, 2013, Hawk has seen a narrowing of the heavy oil differentials for Western Canadian Select (“WCS”) from over $30 per bbl in January and February 2013 to under $20 per bbl for the April 2013 contract month. Current WCS prices are trading at approximately $72.00 to $73.00 per bbl compared to approximately $65.00 per bbl at the time of our last press release. Hawk will continue to monitor the impact of these differentials on the Corporation’s cash flow and, if necessary, will adjust capital spending to maintain its strong balance sheet.
During the first quarter of 2013, Hawk entered into two separate costless collar contracts for West Texas Intermediate Crude (“WTI”). The first costless collar was on a notional 100 bbl/d from April 1, 2013 to December 31, 2013 with a floor price of Canadian (“CAD”) $87.50 per bbl and a ceiling of CAD $97.52 per bbl while the second costless collar contract was for a notional 75 bbl/d from April 1, 2013 to December 31, 2013 with a floor price of CAD $92.00 per bbl and a ceiling of CAD $101.60 per bbl.
GLJ prepared an independent engineering report in accordance with National Instrument 51-101 (“NI 51-101”) with an effective date of December 31, 2012 (the “GLJ Report”). The tables below are a summary of the oil, NGL and natural gas reserves attributable to the Corporation and the net present value of future net revenue attributable to such reserves as evaluated in the GLJ Report.
The net present value of future net revenue attributable to 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 and well abandonment costs for only those wells assigned reserves by GLJ. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to reserves estimated by GLJ represents 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 oil, NGL and natural gas reserves provided herein are estimates only. Actual reserves may be greater than or less than the estimates provided herein.
The reserve data provided in this press release only represents a summary of the disclosure required under NI 51-101. Additional reserves disclosure will be provided in the Corporation’s Annual Information Form to be filed on SEDAR (www.sedar.com) on or before April 30, 2013.
|Summary of Oil and Gas Reserves as of December 31, 2012|
|Oil||Natural Gas||Natural Gas Liquids||Total Oil Equivalent|
|Total Proved plus Probable||1,490||1,282||1,282||896||22||17||1,725||1,449|
|Net Present Value Summary as of December 31, 2012|
|Net Present Value of Future Net Revenue Before Income Taxes
Discounted At (%/year)
|Unit Value Before
|Total Proved plus Probable||55,839||46,022||39,213||34,196||30,340||27.07|
|Total Future Net Revenue (Undiscounted) as of December 31, 2012|
|Total Proved plus Probable||116,043||18,878||36,767||3,412||1,146||55,839|
|Summary of Forecast Pricing and Inflation Assumptions|
|The GLJ Report used the following prices, exchange rates, and inflation rate assumptions as of December 31, 2012:|
|WCS Crude Oil
|AECO – NIT Spot
|Escalated at 2.0 % per year thereafter.|
|FINDING AND DEVELOPMENT COSTS (“F&D”) (1)|
|2012||2011||Three Year Average|
|Exploration and development costs (M$) (2)||9,152||9,152||10,907||10,907||35,339||35,339|
|Change in future development cost (M$)|
|Exploration and development||1,249||838||40||(1,475)||2,225||2,574|
|Total costs (M$)||10,401||9,990||10,947||9,432||37,564||37,913|
|Net reserve additions and revisions (Mboe)||526||592||208||103||1,002||1,268|
|Finding and Development – including future development cost ($/boe)|
|Total F&D costs ($/boe)||19.77||16.87||52.55||91.57||37.48||29.90|
|(1)||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.
|(2)||The Corporation’s annual audit of the 2012 financial statements has not been completed and accordingly
all financial amounts are management’s best estimates which are unaudited and subject to change.
|NET ASSET VALUE|
|M$, except per share amounts||December 31, 2012|
|Proved plus probable reserves discounted at 10% (before taxes)||39,213|
|Undeveloped land (1)||5,344|
|Net debt and working capital deficit (2)||(4,780)|
|Proceeds from dilutive options||737|
|Net asset value||40,514|
|Fully diluted Class A shares outstanding (000’s) (3)||36,954|
|Net asset value per fully diluted Class A share||$1.10|
|Fully diluted Class A and Class B shares outstanding (000’s) (4)||47,754|
|Net asset value per fully diluted Class A and Class B shares||$0.85|
|(1)||Undeveloped land is based on management’s internal estimate at December 31, 2012.
Hawk had a total of 42,748 net acres of land at December 31, 2012 assessed at an
average value of $125 per net acre.
|(2)||The Corporation’s annual audit of the 2012 financial statements has not been completed
and accordingly all financial amounts are management’s best estimates which are
unaudited and subject to change.
|(3)||Includes Class A shares outstanding at December 31, 2012 of 34,480,953 plus dilutive
options of 2,473,000.
|(4)||For purposes of this calculation, Class B shares were converted to Class A shares at
$1.00 per share such that the 1,080,000 Class B shares outstanding at December 31,
2012 were converted into 10,800,000 Class A shares. The Class B common shares are
convertible (at the option of the Corporation) at any time after July 2, 2012 and on or
before June 30, 2014 into Class A shares. The number of Class A shares to be issued
upon conversion of one Class B share is calculated by dividing $10 by the greater of $1
and the then current market price of the Class A shares at the date of conversion. If
conversion has not occurred by the close of business on June 30, 2014, the Class B
shares become convertible (at the option of the shareholder) into Class A shares
pursuant to the conversion formula described above. Effective at the close of business
on July 31, 2014, all remaining Class B shares will be automatically converted into Class A
shares pursuant to the conversion formula described above.
Hawk is an emerging company engaged in the exploration, development and production of conventional crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A Shares and Class B Shares of Hawk trade on the TSX Venture Exchange under the trading symbols of HWK.A and HWK.B, respectively.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Certain statements contained in this press release constitute forward-looking statements. All forward-looking statements are based on the Corporation’s beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Hawk believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
In particular, but without limiting the forgoing, this press release contains forward-looking statements pertaining to the following: the volumes and estimated value of the Corporation’s oil and gas reserves; future oil and natural gas prices; future costs, expenses, royalty rates and the exchange rate between the $US and $CAD; supply and demand for oil and natural gas; planned development of the Corporation’s oil and natural gas properties; the timing of production additions from the first quarter 2013 drilling program; planned timing and nature of the second and third quarter 2013 drilling program; and future capital expenditure programs.
The material factors and assumptions used to develop these forward looking statements include, but are not limited to: the ability of the Corporation to engage drilling contractors, to obtain and transport equipment, services, supplies and personnel in a timely manner and at an acceptable cost to carry out its activities and plans; the ability of the Corporation to market its oil and natural gas and to transport its oil and natural gas to market; the timely receipt of regulatory approvals and the terms and conditions of such approval; the ability of the Corporation to obtain drilling success consistent with expectations; and the ability of the Corporation to obtain capital to finance its exploration, development and operations.
Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors including, without limitation: volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions and exploration and development programs; geological, technical, drilling and processing problems; changes in tax laws and incentive programs relating to the oil and natural gas industry; failure to realize the anticipated benefits of acquisitions; general business and market conditions; and certain other risks detailed from time to time in Hawk’s public disclosure documents.
Statements relating to “reserves” or “resources” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future. Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Except as required under applicable securities laws, Hawk does not undertake any obligation to publicly update or revise any forward-looking statements.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.
SOURCE: Hawk Exploration Ltd.