CALGARY, ALBERTA–(Marketwired – Feb. 17, 2016) – Crew Energy Inc. (TSX:CR) of Calgary, Alberta (“Crew” or the “Company”) is pleased to announce the results of our independent corporate reserves evaluation prepared by Sproule Associates Ltd. (“Sproule”) with an effective date of December 31, 2015 (the “Sproule Report”). The following highlights, reserves summary and strong capital efficiency metrics are directly attributable to Crew’s extremely successful 2015 Montney drilling program.
- Increased proved developed producing (“PDP”) reserves by 51% net of production to 41.4 mmboe with reserves replacement of 240% on annual production of 6,768 mboe;
- Increased proved plus probable (“2P”) reserves by 21% net of production to 260.6 mmboe (76% weighted to natural gas), with a reserve replacement ratio of 694%;
- Increased total proved (“1P”) reserves by 20% net of production to 121.3 mmboe, replacing 318% of reserves;
- Expanded reserves per debt adjusted share across each reserves category, increasing 21% for PDP, 10% for 2P and 6% for 1P;
- Achieved strong capital efficiencies and recycle ratios across all reserves categories despite commodity prices averaging over 40% lower than in 2014, with all-in finding, development and acquisition (“FD&A”) costs and finding and development (“F&D”) costs, including changes in future development capital (“FDC”) as follows:
- 2P FD&A costs were $3.86 per boe, leading to a recycle ratio of 4.3 times and F&D costs were $4.87 per boe, with a recycle ratio of 3.4 times;
- 1P FD&A costs were $0.95 per boe, leading to a recycle ratio of 17.4 times and F&D costs were $3.22 per boe, with a recycle ratio of 5.1 times;
- PDP FD&A costs were $9.89 per boe, leading to a recycle ratio of 1.7 times and F&D costs were $12.87 per boe with a recycle ratio of 1.3 times;
- Realized strong Montney results at our West Septimus area as successful drilling generated 2P reserve bookings that increased 110% to 101.0 mmboe in 2015 from 48.1 mmboe in 2014, with significantly higher gas rates plus liquids reserves that increased 300% year over year;
- Net present value (before tax) discounted at 10% (“NPV10”) of the 2P reserves at West Septimus increased over 288% to $677 million, with only a 14% increase in FDC and a relatively minor increase in booked undeveloped locations, that is a direct reflection of the higher liquids content and well performance which significantly exceeded the type wells used by Sproule for the purposes of Crew’s 2014 independent reserve evaluation;
- Crew’s first Lower Montney well at Septimus has averaged 4.5 mmcf per day over the first 50 days of production with 34 bbls per mmcf of field condensate. Sproule has assigned initial 2P estimated ultimate recoverable (“EUR”) natural gas volumes per well of 4.8 bcf in the 2015 reserves report, confirming that the Lower Montney represents a substantial opportunity for expanded future drilling; and
- Significantly reduced drilling and completion capital due to a combination of industry-wide cost reductions and improvements in Crew’s operational efficiencies, including a reduction in average FDC per well from $4.7 million in 2014 to $4.3 million in 2015 with recent pad wells realizing further reductions to $4.0 million per well.
The reserves additions and metrics highlighted above reflect the quality of Crew’s Montney assets and our success to date in developing the massive resource on our land despite the challenging commodity price environment. Our 2015 reserves evaluation incorporates only 11% of Crew’s land base for Upper Montney reserves with only 3 net sections booked in the Lower Montney highlighting our significant long-term growth potential.
The results of Crew’s development at West Septimus were very positive through 2015 and confirmed the substantial opportunity for further drilling and area expansion. The average 2P reserves per booked undeveloped location at West Septimus increased to 873 mboe (22% liquids) in 2015, up from 554 mboe (15% liquids) in 2014, an improvement of 58%, related to the high quality reservoir in this area and the enhanced completion techniques implemented during 2015. These reserves assignments are based on average 2P EUR per booked undeveloped location of 4.5 bcf per well in 2015 and 3.2 bcf per well in 2014.
In addition to recording our first Lower Montney reserve bookings at Septimus, we continued to increase our average 2P EUR per well for booked undeveloped locations at Septimus from 5.0 bcf in 2014 to 5.6 bcf in 2015. Over the past five years, Crew has progressively increased the average 2P EUR per well for undeveloped locations at Septimus, which in 2015 was 100% higher than the 2.8 bcf average 2P EUR per well assigned at year end 2010. With the Company’s ongoing focus on technology enhancements and implementation, we would anticipate this trend to continue across our extensive undeveloped land base.
Crew’s 2015 reserves evaluation clearly reflects a very successful drilling program highlighted by material improvements in well recoveries and includes 121 proved undeveloped Montney locations and 269 proved plus probable undeveloped Montney locations. Despite a volatile and challenging commodity price environment that has persisted into 2016, the Company is well positioned to remain strong with a flexible capital program that is aligned with our projected cash flow to ensure preservation of our balance sheet strength. As a result of the operational and marketing decisions made in 2015, Crew has the necessary production volumes and market optionality to meet our transportation arrangements, while remaining poised to increase activity when commodity prices improve.
The detailed reserves data set forth below are based upon an independent reserves assessment and evaluation prepared by Sproule with an effective date of December 31, 2015. The following presentation summarizes the Company’s crude oil, natural gas liquids and natural gas reserves and the net present values before income tax of future net revenue for the Company’s reserves using forecast prices and costs based on the Sproule Report. The Sproule Report has been prepared in accordance with definitions, standards, and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI-51-101”). The reserves evaluation was based on Sproule forecast escalated pricing and foreign exchange rates at December 31, 2015 as outlined in the table herein entitled “Price Forecast”.
All evaluations and summaries of future net revenue are stated prior to provision for interest, debt service charges or general administrative expenses and after deduction of royalties, operating costs, estimated well abandonment and reclamation costs and estimated future capital expenditures. It should not be assumed that the estimates of future net revenues presented in the tables below represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without including any royalty interests) unless noted otherwise. In addition to the detailed information disclosed in this news release, more detailed information will be included in the Company’s Annual Information Form (the “AIF”) which will be filed on the Company’s profile at www.sedar.com on or before March 30, 2016.
See “Information Regarding Disclosure on Oil and Gas Reserves and Operational Information” for additional cautionary language, explanations and discussions and “Forward Looking Information and Statements” for a statement of principal assumptions and risks that may apply.
The preparation and audit of Crew’s 2015 annual consolidated financial statements is not yet complete, and accordingly all financial amounts referred to in this news release are unaudited and represent management’s estimates. Readers are advised that these financial estimates may be subject to change.
Reserves Snapshot by Category:
- Added 16.2 mmboe, bringing the total to 41.4 mmboe net of production, resulting in 240% reserves replacement
- $394 MM PV10 value
- FD&A costs of $9.89 per boe, recycle ratio of 1.7 times (including FDC)
- F&D costs of $12.87 per boe, recycle ratio of 1.3 times (including FDC)
- 21% growth in PDP reserves per debt adjusted share over 2014
- Added 21.5 mmboe, bringing the total to 121.3 mmboe net of production, resulting in 318% reserves replacement
- $845 MM PV10 value
- FD&A costs of $0.95 per boe, recycle ratio of 17.4 times (including FDC)
- F&D costs of $3.22 per boe, recycle ratio of 5.1 times (including FDC)
- 6% growth in 1P reserves per debt adjusted share over 2014
- Added 47.0 mmboe, bringing the total to 260.6 mmboe net of production, resulting in 694% reserves replacement
- $1,657 MM PV10 value
- FD&A costs of $3.86 per boe, recycle ratio of 4.3 times (including FDC)
- F&D costs of $4.87 per boe, recycle ratio of 3.4 times (including FDC)
- 10% growth in 2P reserves per debt adjusted share over 2014
|Light and Medium Crude Oil||Heavy Crude Oil||Natural Gas
|Natural Gas(3)||Barrels of
|Total proved plus probable||9,585||10,710||43,203||1,182,791||260,629|
|1.||Reserves have been presented on a “gross” basis which is defined as Crew’s working interest (operating and non-operating) share before deduction of royalties and without including any royalty interest of the Company.|
|2.||Based on Sproule’s December 31, 2015 escalated price forecast.|
|3.||Reflects 100% Conventional Natural Gas by product type.|
|4.||Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil.|
|5.||Columns may not add due to rounding.|
The estimated before tax net present value (“NPV”) of future net revenues associated with Crew’s reserves effective December 31, 2015 and based on the Sproule Report and the published Sproule (December 31, 2015) future price forecast are summarized in the following table:
|Total proved plus probable||5,177,358||2,708,797||1,656,797||1,114,490||798,667|
|1.||The estimated future net revenues are stated prior to provision for interest, debt service charges or general administrative expenses and after deduction of royalties, operating costs, estimated well abandonment and reclamation costs and estimated future capital expenditures.|
|2.||See the Company’s AIF for the after-tax present values of future net revenue attributed to Crew’s reserves.|
|3.||Columns may not add due to rounding.|
The Sproule (December 31, 2015) price forecast is summarized as follows:
|Year||$US/$Cdn Exchange Rate||WTI @ Cushing||Canadian Light Sweet||Western Canada Select||Natural gas AECO-C spot|
|1.||Inflation is accounted for at 1.5% per year.|
The following summary reconciliation of Crew’s gross reserves compares changes in the Company’s reserves as at December 31, 2015 to the reserves as at December 31, 2014 based on the Sproule (December 31, 2015) future price forecast.
|TOTAL PROVED||Light & Medium Crude Oil (mbbl)||Heavy
|Natural Gas Liquids
|Natural Gas (mmcf)||Oil Equivalent (mboe)|
|Extensions & Improved Recovery(1)||0||328||4,879||98,838||21,681|
|PROVED PLUS PROBABLE||Light & Medium Crude Oil (mbbl)||Heavy
|Natural Gas Liquids
|Natural Gas (mmcf)||Oil Equivalent (mboe)|
|Extensions & Improved Recovery(1)||0||1,045||10,164||222,452||48,284|
|1.||Increases to Extensions and Improved Recovery are the result of step-out locations drilled by Crew. Reserves additions for infill drilling, improved recovery, and extensions are combined and reported as “Extensions and Improved Recovery”.|
|2.||Negative Technical Revisions are the result of offsetting well performance at our Attachie and Groundbirch properties affecting undeveloped location type curves.|
|3.||Dispositions reflect reserves sold through Crew’s previously disclosed heavy oil disposition which closed September 30, 2015.|
|4.||Columns may not add due to rounding.|
Capital Program Efficiency
In 2015, Crew achieved the lowest FD&A and F&D costs (including FDC) in the Company’s history, attributable to our successful drilling program, aggressive focus on cost reductions, improved operational efficiencies and aided by strong reservoir performance. Compared to 2014, in 2015 we reduced our 2P FD&A costs by 65% and 2P F&D costs by 49%. Crew’s capital expenditures, net of acquisitions and dispositions in 2015 were estimated at $161 million, which contributed to 2P reserve additions of 47.0 mmboe, at a net FD&A cost of $3.86 per boe, including changes in FDC. Crew’s 1P reserve additions in 2015 were 21.5 mmboe at a low net FD&A cost of $0.95 per boe. Over the past three years, we have generated 2P average FD&A costs of $7.96 per boe and 2P average F&D costs of $8.38 per boe.
The following table provides an overview of Crew’s ability to invest capital efficiently, and generate positive returns from our assets. Details regarding the Company’s capital program for the years ended December 31, 2015 and 2014, along with three year averages are provided below:
|Exploration and Development expenditures(1,2)($ thousands)||209,546||209,546||283, 972||283,972||713,552||713,552|
|Change in future development capital(1)($ thousands)|
|– Exploration and Development||(139,172||)||24,200||345,569||760,353||418,138||999,956|
|Reserves additions with revisions and economic factors (mboe)|
|– Exploration and Development||21,890||47,968||42,474||108,359||102,099||204,451|
|Finding & Development Costs(3)($ per boe)|
|– with revisions and economic factors||3.22||4.87||14.82||9.64||11.08||8.38|
|Finding, Development & Acquisition Costs(3,4)($ per boe)|
|– with revisions and economic factors||0.95||3.86||n/a||11.09||9.91||7.96|
|Reserve Life Index based on annualized 2015 fourth quarter production (years)(7)||16.1||34.5||14.0||28.9|
|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 capital generally will not reflect total finding and development costs related to reserve additions for that year.|
|2.||The exploration and development expenditures are reduced by $36.9 million reflecting the recovery of costs incurred from Crew’s West Septimus facility partners.|
|3.||The calculation of F&D and FD&A costs incorporates the change in FDC required to bring proved undeveloped and developed reserves into production. In all cases, the F&D or FD&A number is calculated by dividing the identified capital expenditures by the applicable reserves additions after changes in FDC costs.|
|4.||Due to the significant dispositions of 1P reserves associated with the Alberta Gas and Princess transactions in 2014, the 1P FD&A costs are rendered not applicable in that year.|
|5.||Recycle ratio is defined as operating netback per boe divided by F&D costs on a per boe basis. Operating netback is calculated as revenue (including realized hedging gains and losses) minus royalties, operating expenses, and transportation expenses. Crew’s operating netback in 2015 averaged $16.57 per boe (unaudited).|
|6.||Reserves replacement ratio is calculated as total reserve additions (including acquisitions net of dispositions) divided by annual production. Crew’s 2015 annual production averaged 18,542 boe/d.|
|7.||Reserve life index (“RLI”) is calculated as Company gross reserves divided by average fourth quarter production annualized.|
Future Development Capital
The following table provides a summary of the estimated FDC required to bring Crew’s 2P undeveloped reserves to production.
|Future Development Capital ($millions)(1)||Total
|Total FDC undiscounted||591||1,316|
|Total FDC discounted at 10%||409||883|
|1.||FDC as per Sproule independent reserve evaluation effective December 31, 2015 based on Sproule forecast pricing.|