CALGARY, Feb. 23, 2016 /CNW/ – Journey Energy Inc. (JOY – TSX) (“Journey” or the “Company“) is pleased to report its year end 2015 oil and gas reserves evaluation. During 2015, the company invested approximately $48 million in its capital program including $41 million in exploration and development, and $7 million to consolidate working interests in core properties. In response to decreasing commodity prices, Journey’s capital program was adjusted lower to preserve our balance sheet. Total capital and development capital expenditures for 2015 were 20% and 45% of 2014 levels respectively.
Highlights:
- Increased proved plus probable reserves to a Company record level of 49.8 MMboe, while increasing liquids weighting to 58% from 54% in 2014.
- Proved plus probable net asset value discounted at 10% of $9.12 per basic share outstanding.
- Proved plus probable, developed, producing net asset value discounted at 10% of $4.56 per basic share outstanding.
- Proved, developed producing reserves accounted for 40% of total proved plus probable reserves while proved reserves accounting for 58%.
- Finding, development, and acquisition (“FD&A”) costs, including change in future development capital:
- $11.73 per boe for proved reserves.
- $5.13 per boe for proved plus probable reserves.
- Finding and development costs (“F&D”) costs, including change in future development capital:
- $9.39 per boe for proved reserves.
- $3.69 per boe for proved plus probable reserves.
- Journey has consistently achieved strong Proved plus Probable FD&A recycle ratios. For the year ended December 31, 2015 we achieved a ratio of:
- 2.6 times for FD&A costs with proved plus probable reserves.
- 3.6 times for F&D costs with proved plus probable reserves.
- Proved plus probable reserve life index of 13.1 years, with only $3.55/boe of future development capital booked in the report
- Proved developed producing and proved plus probable developed producing reserve life index of 6.2 and 8.0 years respectively
COMPANY GROSS WORKING INTEREST OIL AND GAS RESERVES AND NET PRESENT VALUES
The following table provides summary information presented in the GLJ Petroleum Consultants Limited (“GLJ”) independent reserves assessment and evaluation effective December 31, 2015 (the “GLJ Report”). GLJ evaluated 100% of Journey’s crude oil, natural gas liquids (“NGL”) and natural gas reserves. The evaluation of all of its oil and gas properties was done in accordance with the 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”). Detailed reserve information will be presented in the Company’s upcoming Statement of Reserves Data and Other Oil and Gas Information section of the Company’s Annual Information Form scheduled to be filed on SEDAR on or before March 31, 2016.
Company Gross Reserves
Based on Forecast Price and Costs as at December 31, 2015
|
Light/Medium Oil |
Heavy Oil |
Natural Gas |
NGL |
Total(2) |
||
|
Reserves category |
(Mbbl) |
(Mbbl) |
(MMcf) |
(Mbbl) |
(Mboe) |
|
|
Proved |
||||||
|
Producing |
7,265 |
2,061 |
56,786 |
1,375 |
20,165 |
|
|
Non-producing |
292 |
38 |
9,477 |
53 |
1,962 |
|
|
Undeveloped |
4,159 |
493 |
12,093 |
282 |
6,949 |
|
|
Total proved |
11,716 |
2,592 |
78,356 |
1,710 |
29,077 |
|
|
Probable |
9,368 |
2,848 |
46,142 |
858 |
20,765 |
|
|
Total proved plus probable |
21,084 |
5,441 |
124,497 |
2,567 |
49,842 |
|
|
Total Producing Category |
||||||
|
Proved plus probable producing |
9,986 |
2,736 |
76,085 |
1,785 |
27,188 |
|
|
Notes: |
|
|
(1) |
Company Gross Reserves consists of Journey’s working interest (operated and non-operated) share of reserves before deduction of royalties payable and without including royalties receivable by the Company. |
|
(2) |
In the case of natural gas volumes, boe’s are derived by converting natural gas to oil using the ratio of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf:1 bbl). |
|
(3) |
Total values may not add due to rounding. |
Net Present Values of Future Net Revenue (Based on Forecast Prices and Costs)
|
Before Tax Net Present Value ($000’s) |
||||||
|
Reserves category |
0% |
5% |
10% |
15% |
20% |
|
|
Proved |
||||||
|
Producing |
339,292 |
262,408 |
212,341 |
178,335 |
154,080 |
|
|
Non-producing |
33,149 |
16,093 |
9,696 |
6,415 |
4,438 |
|
|
Undeveloped |
157,048 |
87,645 |
53,585 |
34,083 |
21,825 |
|
|
Total proved |
529,489 |
366,145 |
275,622 |
218,833 |
180,343 |
|
|
Probable |
543,090 |
321,661 |
210,179 |
146,648 |
107,139 |
|
|
Total proved plus probable |
1,072,579 |
687,806 |
485,801 |
365,481 |
287,482 |
|
|
Total Producing Category |
||||||
|
Proved plus probable producing |
522,470 |
374,147 |
287,053 |
232,091 |
194,968 |
|
|
Notes: |
|
|
(1) |
Total values may not add due to rounding |
|
(2) |
Forecast pricing used is the average of the published price forecasts for GLJ Petroleum Consultants Ltd., Sproule Associates Ltd. and McDaniel & Associates Consultants Ltd. as at December 31, 2015. |
|
(3) |
It should not be assumed that the net present values of future net revenues estimated by GLJ represent fair market value of the reserves. There is no assurance that the forecast price and cost assumptions will be attained and variances could be material. |
The forecast prices and foreign exchange rates used in the GLJ Report is as follows:
|
WTI Cushing Oklahoma ($US/bbl) |
Edmonton Par 40 API ($Cdn/bbl) |
Alberta AECO-spot ($Cdn/mmbtu) |
Foreign Exchange ($US/$CDN) |
|
|
2016 |
44.67 |
55.89 |
2.57 |
0.735 |
|
2017 |
55.20 |
66.47 |
3.14 |
0.767 |
|
2018 |
63.47 |
73.21 |
3.47 |
0.802 |
|
2019 |
71.00 |
81.35 |
3.80 |
0.817 |
|
2020 |
74.77 |
84.57 |
3.99 |
0.833 |
|
2021 |
78.24 |
87.88 |
4.13 |
0.842 |
|
2022 |
81.75 |
92.01 |
4.30 |
0.842 |
|
2023 |
85.37 |
96.24 |
4.48 |
0.842 |
|
2024 |
87.32 |
98.17 |
4.60 |
0.842 |
|
2025 |
88.90 |
99.94 |
4.70 |
0.842 |
|
2026 |
90.54 |
101.79 |
4.79 |
0.842 |
|
2027 |
92.22 |
103.69 |
4.88 |
0.842 |
|
2028 |
93.90 |
105.55 |
4.96 |
0.842 |
|
2029 |
95.62 |
107.49 |
5.05 |
0.842 |
|
2030 |
97.40 |
109.49 |
5.15 |
0.842 |
|
Thereafter |
+1.8%/yr |
+1.8%/yr |
+1.8%/yr |
0.842 |
FINDING, DEVELOPMENT AND ACQUISITION COSTS (“FD&A”)
Journey’s finding and development (“F&D”) and finding, development and acquisition (“FD&A”) costs for 2015, 2014 and the three year average are presented in the tables below. The capital costs used in the calculations are those costs related to: land acquisition and retention, seismic, drilling, completions, tangible well site, tie-ins, and facilities, plus the change in estimated future development costs (“FDC”) as per the independent evaluator’s reserve report. Acquisition costs are the net cash outlays in respect of acquisitions; minus the proceeds from the disposition of properties during the year. Due to the timing of capital costs and the subjectivity in the estimation of future costs, the aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated FDC’s generally will not reflect total FDC’s related to reserve additions for that year. The reserves used in this calculation are working interest reserve additions, including technical revisions and changes due to economic factors. The 2015 capital expenditures are unaudited as the financial results are in the process of being finalized.
|
Proved Finding, Development & Acquisition Costs |
2015 |
2014 |
3 Year Average |
|
|
Capital expenditures (including acquisitions; net of |
48,051 |
260,390 |
||
|
Change in future capital ($000’s) |
(16,911) |
30,143 |
||
|
Total capital for FD&A (unaudited 000’s) |
31,140 |
290,533 |
||
|
Reserve additions, including acquisitions (Mboe) |
2,654 |
19,826 |
||
|
Proved FD&A costs – including changes in future capital |
11.73 |
14.65 |
15.13 |
|
|
Proved FD&A costs – excluding changes in future capital |
18.11 |
13.13 |
14.72 |
|
|
Recycle ratio(1) |
||||
|
Including changes in future capital |
1.1 |
2.1 |
1.6 |
|
|
Proved plus Probable Finding, Development & Acquisition Costs |
2015 |
2014 |
3 Year |
|
|
Average |
||||
|
Capital expenditures (including acquisitions; net of |
48,051 |
260,390 |
||
|
Change in future capital ($000’s) |
(27,832) |
73,527 |
||
|
Total capital for FD&A (unaudited; in 000’s) |
20,219 |
333,917 |
||
|
Reserve additions, including acquisitions (Mboe) |
3,942 |
28,320 |
||
|
Proved plus Probable FD&A costs – including changes in |
5.13 |
11.79 |
11.38 |
|
|
Proved plus Probable FD&A costs – excluding changes in |
12.19 |
9.19 |
10.08 |
|
|
Recycle ratio (1) |
||||
|
Including changes in future capital |
2.6 |
2.6 |
2.1 |
|
|
Proved Finding & Development Costs |
2015 |
2014 |
3 Year Average |
||
|
Capital expenditures (excluding acquisitions, unaudited, |
40,536 |
88,218 |
|||
|
Change in future capital ($000’s) |
(18,774) |
5,480 |
|||
|
Total capital for F&D (unaudited $000’s) |
21,762 |
93,698 |
|||
|
Reserve additions, excluding acquisitions (Mboe) |
2,318 |
5,442 |
|||
|
Proved F&D costs – including changes in future capital |
9.39 |
17.22 |
16.81 |
||
|
Proved F&D costs – excluding changes in future capital |
17.49 |
16.21 |
19.36 |
||
|
Recycle ratio (1) |
|||||
|
Including changes in future capital |
1.4 |
1.8 |
1.4 |
||
|
Proved Plus Probable Finding & Development Costs |
2015 |
2014 |
3 Year Average |
||
|
Capital expenditures (excluding acquisitions, unaudited, |
40,536 |
88,218 |
|||
|
Change in future capital ($000’s) |
(31,274) |
13,681 |
|||
|
Total capital for F&D (unaudited $000’s) |
9,262 |
101,899 |
|||
|
Reserve additions, excluding acquisitions (Mboe) |
2,513 |
7,138 |
|||
|
Proved plus Probable F&D costs – including changes in |
3.69 |
14.28 |
12.41 |
||
|
Proved plus Probable F&D costs – excluding changes in |
16.13 |
12.36 |
14.49 |
||
|
Recycle ratio (1) |
|||||
|
Including changes in future capital |
3.6 |
2.1 |
1.9 |
||
|
Notes: |
|
|
(1) |
Recycle ratio is calculated as the operating netback per boe divided by F&D or FD&A costs per boe as applicable. The operating netbacks used in the respective years are as follows: 2015 (unaudited) – $13.26/boe; 2014 – $30.61 and the three year average is $23.70. |
|
(2) |
Development capital has been adjusted for the effects of reserves categorized as acquisitions and dispositions |
Future Development Costs
The following table provides the breakdown of future development costs deducted in the estimation of the future net revenue attributable to the proved and proved plus probable reserve categories noted below:
|
Year |
Proved Reserves ($000’s) |
Proved plus Probable Reserves ($000’s) |
|
2016 |
10,755 |
19,339 |
|
2017 |
42,963 |
76,309 |
|
2018 |
17,457 |
65,198 |
|
2019 |
2,733 |
8,218 |
|
2020 |
2,862 |
5,431 |
|
Remaining |
1,763 |
2,387 |
|
Total (Undiscounted) |
78,533 |
176,882 |
Reserve Life Index
The Company’s reserve life index (“RLI”) is calculated using the Company Gross Reserves from the GLJ Report and dividing them by the projected 2016 production as estimated in the report.
|
Gross Company Reserves |
2016 Production |
RLI |
|
|
Reserves category |
(Mboe) |
(Mboe) |
(Years) |
|
Proved, developed, producing |
20,165 |
3,272 |
6.2 |
|
Proved plus probable producing |
27,188 |
3,406 |
8.0 |
|
Total proved |
29,077 |
3,424 |
8.5 |
|
Proved plus probable |
49,842 |
3,803 |
13.1 |
Net Asset Value
The following table provides a calculation of Journey’s estimated net asset value (“NAV”) and net asset value per share (“NAVPS”) as at December 31, 2015 based on the estimated future net revenues associated with Journey’s reserves as presented in the GLJ Report.
|
Reserves category |
NPV10(1) ($000’s) |
NAV(2) ($000’s) |
NAVPS(3) ($/share) |
|
Proved, developed, producing |
212,341 |
124,222 |
2.85 |
|
Total proved |
275,622 |
187,503 |
4.30 |
|
Proved plus probable producing |
287,053 |
198,934 |
4.56 |
|
Proved plus probable |
485,801 |
397,682 |
9.12 |
|
Notes: |
|
|
(1) |
Future net revenues as per the GLJ report on a before tax basis, discounted at 10%. |
|
(2) |
NAV is calculated by taking the discounted future net revenues and adjusting for the following: |
|
a) Undeveloped land value of $18,627 thousand as per management’s estimate of value at December 31, 2015. |
|
|
b) Net debt of $106,746 thousand (unaudited) as at December 31, 2015. |
|
|
(3) |
NAVPS is calculated using the total basic shares outstanding as at December 31, 2015 of 43,615 thousand. |
2016 GUIDANCE
The extended downturn in both oil and natural gas prices is creating a tremendous challenge for our industry. The future development capital projects in Journey’s reserve evaluation generate attractive rates of return in excess of 50% using year-end consensus price forecasts. Rates of return on our inventory are similar to 2014 levels, with lower pricing being offset by lower capital costs and the ability to do more with less capital. This bodes well for Journey and for our industry. With that being said, strip prices remain below forecasted prices for the near term.
Although current commodity price levels appear to be unsustainable, and the return to higher pricing seems inevitable, Journey remains in the fortunate position of owning and operating our own destiny. We face no expiry issues since our legacy low decline pools are retained with producing wells. This allows Journey the flexibility to prioritize, maintain, or reduce current debt levels over spending development capital. Journey intends to take advantage of low industry costs to prudently expand long lead time water flood projects and remains poised to ramp up capital expenditures and return production to previous levels as commodity prices improve.
Journey’s guidance for 2016 is as follows:
|
Annual average production |
8,700 to 9,000 boe/d (55% liquids) |
|
Capital program (excluding acquisitions) |
$9 million |
|
Cash flow |
$15 – $16 million |
|
Year end net debt |
$100 – $101 million |
|
Cash flow per basic, weighted average share |
$0.34 – $0.37 |
Journey’s muted 2016 capital program is currently forecast to yield annual production volumes in the 8,700 to 9,000 boe/d range. The currently projected $9 million in capital will be allocated to drilling, completing, equipping and tieing-in 3 (2.5 net) wells in Brooks and Skiff, as well as waterflood expansion projects in Matziwin, Skiff and Herronton. Journey is increasing its emphasis on waterflood expansion due to favorable response indications from its current projects. These projects require longer lead times for production response, which in turn provide time for commodity prices to stabilize. In addition, these projects will contribute to the reduction in our corporate decline rate from the current 22% to approximately 18% by 2017.
With the planned 2016 capital program, Journey is forecasting cash flow of between $15 and $16 million with net debt exiting the year between $100 and $101 million. These projections are based on the following average commodity prices and foreign exchange: WTI of US $39/bbl; AECO gas of CDN $2.40/mcf; and a foreign exchange rate of $0.72 US$/CDN$.
Journey will operate substantially all of its 2016 capital program with an average working interest of over 90%. Because of this, Journey can remain flexible with this budget, increasing or decreasing its spending should prices materially change. Journey has over $40 million in economic, capital ready projects that have been deferred and are readily available as soon as cash flow levels improve. Management feels it prudent to not allow the debt to increase beyond current levels, and based on the above guidance, it is currently projected to decrease year over year.
About the Company
Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in western Canada. Journey’s strategy is to grow its production base by drilling on its existing core lands, implementing water flood projects, executing on accretive acquisitions. Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.
