CALGARY, ALBERTA–(Marketwired – March 23, 2015) – Striker Exploration Corp. (“Striker” or the “Company”) (TSX VENTURE:SKX) is pleased to provide a summary of its 2014 year-end reserves and an update of operations, including details of a recent acquisition.
The highlights and reserves summary below sets forth Striker’s gross reserves as at December 31, 2014, as evaluated in an independent report prepared by GLJ Petroleum Consultants Ltd. (“GLJ”) dated March 19, 2015 (the “GLJ 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 “COGE Handbook”) and the reserve definitions contained in 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 by April 30, 2015.
- Net asset value, including estimated year-end 2014 net debt ($7.5 million or $0.28 per basic share outstanding) and excluding undeveloped land, tax pools, seismic, reclamation liabilities, and other corporate attributes (“NAV”), was $2.84/share on a proved developed producing (“PDP”) discounted at 10% (“NPV10”) and $5.36/share on a total proved plus probable basis (“2P”) NPV10;
- Comparatively when applying March 18, 2015 commodity strip pricing to the reserve evaluation effective December 31, 2014, NAV was $1.94/share on a PDP NPV10 basis and $3.45 on a 2P NPV10 basis (see below for further detail);
- Year-end 2014 PDP reserves increased to 4,547 Mboe (56% oil and liquids) from 349 Mboe at year-end 2013 and total proved (“1P”) reserves increased to 6,398 Mboe from 538 Mboe in 2013;
- Before tax net present value of the PDP reserves NPV10 was $83.8 million ($103.0 million on a 1P basis) compared to $9.0 million ($9.8 million on a 1P basis) at year-end 2013;
- PDP reserves represent approximately 72% of 1P reserves and approximately 46% of 2P reserves;
- Finding, development and acquisition (“FD&A”) costs, including changes to future development capital (“FDC”), were $25.53 on a 1P basis and $18.41 per boe on a 2P basis;
- The Company’s reserve life index is 5.7 years on a 1P basis and 8.8 years on a 2P basis based on December, 2014 average production;
- After applying up-to-date commodity pricing and production levels to the 2015 budget, management’s revised cash flow forecast and average net debt in 2015 of approximately $7 million indicates current debt to cash flow of 0.75x.
- Financial information is based on the Company’s preliminary estimate of 2014 year-end results and is therefore subject to change.
For illustrative purposes only, and independent from the NI 51-101 GLJ reserve evaluation disclosed herein, Striker management applied current strip pricing as at March 18, 2015 to the gross reserves as at December 31, 2014. The result was PDP NPV10 value of $59.6 million and 1P NPV10 value of $69.9 million. For reference the strip pricing was obtained by GLJ at March 18, 2015. The prices in 2015 were CAD/USD exchange at 0.7877, WTI at US$49.26/bbl, Edmonton Light Sweet (40 API) $53.02/bbl, and AECO at $2.79/MMBtu. Prices were inflated 2% per year beyond 2015. The CAD/USD exchange was forecast to rise at less than 1% per year after 2015 until it reached 0.8081 in 2021 where it was held constant thereafter.
|December 31, 2014
|March 18, 2015
|Total Proved plus Probable||151,291||5.64||100,003||3.73|
|Net Asset Value||143,791||5.36||92,503||3.45|
- Basic shares outstanding of 26.83 million. All dilutive instruments currently out of the money.
- NAV on a PDP basis cited in the highlights above are the resulting PDP per basic share less net debt of $7.5 million or $0.28/share.
- Financial information is based on the Company’s preliminary estimate of 2014 year-end results and is therefore subject to change.
Summary of Gross Oil and Gas Reserves as of December 31, 2014 (1), (2), (3), (4)
|Total Proved plus Probable||5,697||22,301||532||9,946|
|Net Present Value Before Income Taxes Discounted at (% per Year) (M$)|
|Total Proved plus Probable||290,116||200,103||151,291||121,110||100,734|
- The tables summarize the data contained in the GLJ Report and as a result may contain slightly different numbers due to rounding.
- Gross reserves means the total working interest (operating or non-operating) share of remaining recoverable reserves owned by Striker before deductions of royalties payable to others and without including any royalty interests owned by Striker.
- Based on GLJ’s December 31, 2014 escalated price forecast. See “Summary of Pricing and Inflation Rate Assumptions”.
- 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, 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 the Company’s reserves estimated by GLJ 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.
Future Development Costs
The following table sets forth development costs deducted in the estimation of Striker’s future net revenue attributable to the reserve categories noted below:
|Forecast Prices and Costs (M$)|
|Total Discounted at 10%||29,435||45,364|
The future development costs are estimates of capital expenditures required in the future for Striker to convert proved undeveloped reserves and probable reserves to proved developed producing reserves. The undiscounted future development costs are $33.2 million for proved reserves and $51.5 million for proved plus probable reserves (in each case based on forecast prices and costs).
Summary of Pricing and Inflation Rate Assumptions – Forecast Prices and Costs
The forecast cost and price assumptions assume increases in wellhead selling prices and take into account inflation with respect to future operating and capital costs. Crude oil and natural gas benchmark reference pricing, inflation and exchange rates utilized by GLJ as at December 31, 2014 were as follows:
2014 FD&A COSTS
|FD&A Costs (M$)|
|Exploration and Development Capital||7,278||7,278|
|Acquisitions, net of dispositions||115,182||115,182|
|Total change in FDC||31,711||49,486|
|Total FD&A capital including change in FDC||154,171||171,946|
|Total Reserve additions, including revisions (Mboe)||6,038||9,338|
|FD&A costs, including FDC ($/boe)||25.53||18.41|
- Financial information is based on the Company’s preliminary 2014 unaudited financial statements and is therefore subject to audit.
- While NI 51-101 requires that the effects of acquisitions and dispositions be excluded from the calculation of finding and development costs, FD&A costs have been presented because acquisitions and dispositions can have a significant impact on the Company’s ongoing reserve replacement costs and excluding these amounts could result in an inaccurate portrayal of the Company’s cost structure. Finding and development costs excluding acquisitions and dispositions have been presented below.
- 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 reserves additions for that year.
- As Striker commenced operations with the recapitalization of Elkwater Resources Ltd. in July 2014, three year average costs are not available.
- The acquisitions include the announced purchase price of corporate acquisitions rather than the amounts allocated to property, plant and equipment and exploration and evaluation assets for accounting purposes. Capital expenditures include costs of land and seismic but exclude capitalized general and administration costs.
The Brazeau Belly River 16-04-46-09W5 horizontal oil well (100% working interest) average gross production was 415 boepd (63% oil and NGLs) in its first 98 days based on field reports. This is a strong well that continues to perform above type curve expectations despite being rate restricted during the current commodity price environment. GLJ has assigned two additional locations offsetting 16-04 and management of the Company has identified the potential for up to six additional locations contingent on success.
The Chigwell Belly River 102/15-28-42-26W4 horizontal oil well (100% working interest) has been on production since November 2013 and has cumulative production of 179 Mbbl and 308 MMcf to March 15, 2015. Field-reported production for February 2015 averaged 465 boepd (86% oil and NGL’s). This is a very strong well that continues to perform well above type curve expectations due to a combination of its high quality reservoir rock and solid waterflood response. GLJ has assigned one additional location offsetting 102/15-28 and management of the Company has identified the potential for one additional location at this time.
BELLY RIVER ACQUISITION
During February 2015, Striker closed a Belly River acquisition from a major independent for $1.75 million with assets in two of the Company’s key Belly River project areas, East Pembina and Chigwell. The attributes which the Company found attractive include:
- 25 gross (23.0 net) undeveloped sections;
- 10 infill-development/delineation Belly River horizontal oil locations;
- Potential for more horizontal locations contingent on success;
- 45 boepd (65% oil) from two Belly River horizontal wells plus 3 standing horizontal wells; and
- 52 square miles of 3D seismic and 93 miles of 2D seismic.
This acquisition is consistent with Striker’s objectives of focusing on shallow light oil prospects, increasing its horizontal location inventory, building out Company-operated core areas and being non-disruptive to its financial position. Management is excited that this deal provides the potential to drill Belly River wells similar to those at Brazeau and Chigwell. Dundee Securities Ltd. acted as advisor to the Company with respect to the acquisition.
The Company remains focused in its efforts to identify, capture and execute on additional opportunities, including those within its Belly River core region.
Striker, formerly Elkwater Resources Ltd., is a growth-oriented, light oil focused company operating predominantly in Alberta. Striker’s full-cycle business plan provides an excellent opportunity to position itself as a high-growth junior E&P company. With an experienced management team and a strong committed Board, growth is expected to occur through timely strategic acquisitions and drilling. Striker currently trades on the TSX Venture Exchange under ticker “SKX”.
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, future production levels, future development costs associated with oil and gas reserves, filing of the Company’s annual information form, future drilling locations and the Company’s intention to identify, capture and execute on additional opportunities. 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 Striker, including expectations and assumptions concerning the success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the availability and performance of facilities and pipelines, the geological characteristics of Striker’s properties, the successful application of drilling, completion and seismic technology, prevailing weather and break-up conditions, commodity prices, 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 our ability to acquire additional assets.
Although Striker 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 Striker 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 in general (e.g., operational risks in development, exploration and production; 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, commodity price and exchange rate fluctuations, 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 Striker’s Annual Information Form for the year ended December 31, 2013.
The forward-looking information contained in this press release is made as of the date hereof and Striker 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.
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.
Finding, Development and Acquisition Costs: Finding and development costs including acquisitions and dispositions have been presented herein. While NI 51-101 requires that the effects of acquisitions and dispositions be excluded, FD&A costs have been presented because acquisitions and dispositions can have a significant impact on the Company’s ongoing reserve replacement costs and excluding these amounts could result in an inaccurate portrayal of the Company’s cost structure. The Company’s finding and development costs, excluding the effects of acquisitions and dispositions, for 2014 were $12.35/boe on a proved basis and $6.60/boe on a proved plus probable basis. 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 reserves additions for that year.
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. Management believes “net debt” is a useful supplemental measure of the total amount of current and long-term debt of the Company. Additional information relating to non-IFRS measures can be found in the Company’s most recent management’s discussion and analysis MD&A, which may be accessed through the SEDAR website (www.sedar.com).
Production Rates. Any references in this press release to initial production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue to produce and decline thereafter and are not necessarily indicative of long-term performance or ultimate recovery. Readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. Such rates are based on field estimates and may be based on limited data available at this time.
Striker Exploration Corp.
President and Chief Executive Officer
Striker Exploration Corp.
Vice President, Finance and Chief Financial Officer