CALGARY, ALBERTA–(Marketwired – March 14, 2016) – GRANITE OIL CORP. (“Granite” or the “Company”) (TSX:GXO)(OTCQX:GXOCF) is pleased to present the summary results of the independent reserves report (the “Sproule Report”) prepared by Sproule Associates Ltd. (“Sproule”) with an effective date of December 31, 2015.
During 2015, $41.2 million was invested in Granite’s assets. The primary aim of the 2015 capital program was to expand the gas injection Enhanced Oil Recovery (EOR) scheme on its 100%-owned Alberta Bakken property. During 2015, the Company drilled and completed ten horizontal production wells, added four new gas injection wells through the conversion of four formerly producing wells, and substantially increased the volume of gas injected into the reservoir. Granite also took advantage of low equipment and service costs to expand the EOR infrastructure through the purchase of additional compression facilities, providing the Company with long-term injection capacity for the continued growth of the EOR program.
Granite’s Alberta Bakken property produced an average of 3,496 boe per day (92% oil) during 2015, with a fourth quarter average production rate of 3,476 boe per day (96% oil). During 2015, Granite’s averaged realized operating netback is estimated to be $25.27/boe.
2015 Reserve Highlights
- Finding and Development (F&D) costs were $6.13/boe based on the change in total proved plus probable (“2P”) reserves, including the change in future development capital (“FDC”), resulting in a 2P recycle ratio of 4.1 times(1)(2).
- F&D costs of $19.23/boe based on the change in total proved (“TP”) reserves, including the change in FDC resulting in a TP recycle ratio of 1.3 times(1)(2).
- Increased proved developed producing (“PDP”) oil reserves by 7.4% to 5,050 Mbbl, all as a result of Granite’s 2015 drilling program.
- Granite’s PDP reserves represent approximately 31% of the total proved plus probable (“2P”) reserves.
- 2P reserves increased by 4.4% to 17,704 Mboe.
- TP reserves increased by 7.4% to 11,166.4 Mboe.
- 725 Mbbl of proved oil reserves and 775 Mbbl of probable oil reserves are included in the Improved Recovery category in the Sproule Report associated with the EOR scheme. These initial bookings represent a conservative approach to the incremental recovery potential of the EOR scheme.
- Costs associated with drilling future wells dropped by 29% to an average of $2.14 million per well, reflecting cost improvements Granite has achieved in 2015. Proved and probable future development capital was $73.4 million in 2015, a 28% reduction relative to 2014. Granite anticipates further cost reductions in 2016.
- Reserve life index of approximately 8.8 years on a total proved basis and 14.0 years based on a 2P basis (based on average fourth quarter 2015 production rate of 3,476 boe per day).
- Granite’s 2015 drilling program resulted in PDP and 2P reserve additions replacing 117% and 158%, respectively, of production.
Notes:
- Financial information is based on the Company’s preliminary 2015 unaudited financial statements and is therefore subject to audit
- Recycle ratio is calculated as operating netback divided by F&D costs including changes in FDC. Calculation is based on estimated 2015 operating netback of $25.27per boe, which is calculated as revenue less royalties and production costs.
Comparisons to Granite’s prior-year reserves set out above refer to reserves data in the independent reserves report of Sproule with an effective date of January 1, 2015, with respect to Granite’s Alberta Bakken property. The Company’s Information Circular dated April 9, 2015, a copy of which is available on the Company’s SEDAR profile at www.sedar.com, includes additional reserves data from this reserves report. As described in this information circular, the Company completed a reorganization (the “Reorganization”) in May 2015 which, among other things, resulted in the conveyance by the Company to Boulder Energy Ltd. of all of its oil and gas assets other than its Alberta Bakken property.
2015 Year End Reserves
The evaluation of Granite’s petroleum and natural gas reserves was prepared by Sproule, an independent reserves evaluator, in accordance with definitions, standards and procedures contained in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) and the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”). 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 March 30, 2016. Financial information presented above is based on management-prepared financial statements for the year ended December 31, 2015, which are in the process of being audited by Granite’s independent auditors and, accordingly, such financial information is subject to change based on the results of the audit. See “Reader Advisory – Unaudited Financial Information” below.
Summary of Gross Oil and Gas Reserves as of December 31, 2015 (1)(2)(3)(4)(5)(6)
Reserves Category | Oil(6) (Mbbl) | Gas (MMcf) |
Oil Equivalent (MBOE) |
BTAX PV 10% ($000’s) |
Future Development Capital ($000’s) |
Recycle Ratio |
Proved Developed Producing | 5,050 | 3,097 | 5,566 | 114,482 | 0 | |
Proved Developed Non-Producing | 120 | 7,241 | 1,327 | 4,607 | 984.4 | |
Proved Undeveloped | 4,062 | 1,263 | 4,273 | 47,476 | 61,553.1 | |
Total Proved | 9,233 | 11,601 | 11,166 | 166,565 | 62,637.5 | 1.3x |
Probable Developed Producing | 2,755 | 1,707 | 3,040 | 51,968 | 0 | |
Probable Developed Non-Producing | 70 | 3,752 | 696 | 2,129 | 0 | |
Probable Undeveloped | 2,719 | 499 | 2,802 | 43,357 | 10,792 | |
Total Probable | 5,545 | 5,958 | 6,538 | 97,454 | 10,792 | |
Total Proved + Probable | 14,778 | 17,559 | 17,704 | 264,019 | 73,429.4 | 4.1x |
Summary of Net Present Value of Future Net Revenue as of December 31, 2015 (1)(2)(3)(4)(5)
Net Present Value Before Income Taxes Discounted At | |||||
0% | 5% | 10% | 15% | 20% | |
($M) | ($M) | ($M) | ($M) | ($M) | |
Proved | |||||
Developed producing | 175,123 | 139,114 | 114,482 | 97,147 | 84,510 |
Developed non-producing | 24,719 | 10,085 | 4,607 | 2,416 | 1,468 |
Undeveloped | 113,077 | 71,726 | 47,476 | 32,347 | 22,351 |
Total Proved | 312,919 | 220,925 | 166,565 | 131,909 | 108,329 |
Total Probable | 254,429 | 146,399 | 97,454 | 71,525 | 55,938 |
Total Proved plus Probable | 567,348 | 367,323 | 264,019 | 203,434 | 164,267 |
Notes:
- The tables summarize the data set out in the Sproule Report and, as such, the totals may not add due to rounding.
- Reserves have been presented on a gross basis which are the Company’s total working interest share before the deduction of any royalties and without including any royalty interests of the Company.
- Based on Sproule’s December 31, 2015, escalated price forecast. See “Pricing Assumptions” below.
- The net present value of future net revenues attributable to the Company’s reserves are stated prior to provision for interest, general and administrative expenses, and after deduction of royalties, operating costs, estimated future capital expenditures, and estimated well abandonment and reclamation costs of existing and future wells evaluated by Sproule and does not include abandonment costs for wells to which reserves have not been attributed, or the abandonment and reclamation costs of facilities and pipelines. Future net revenues have been presented on a before-tax basis. It should not be assumed that the present worth of estimated future net revenue presented in the tables above represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserves estimates of Granite’s crude oil 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.
- The Company’s reserves are developed with horizontal wells completed with multi-stage fracturing techniques.
- “Oil” values include all light & heavy oil volumes, and natural gas liquids volumes.
Net Asset Value
Based on Sproule’s December 31, 2015, forecast pricing, Granite’s net asset value calculation is as set out in the following table.
Summary of Net Asset Value as of December 31, 2015(1)
NAV – Year ended December 31, 2015 | ($M) |
2P Reserves NPV 10 before tax (Sproule) | 264,019 |
Net undeveloped land value (internal valuation)(1) | 39,200 |
Estimate Net Debt (unaudited) | (39,612) |
Proceeds from dilutive securities | 747 |
Net asset value | 264,354 |
Fully Diluted shares outstanding (000’s) | 31,500 |
Estimate NAV per fully diluted share ($/share) | $8.39 |
Note:
- Land value includes 392,000 net undeveloped acres at $100 per acre
Future Development Capital
Summary of Future Development Capital as of December 31, 2015
Future Development Capital | ($M) | ($M) |
Year | Total Proved |
Total Proved + Probable |
2016 | 14,150 | 14,150 |
2017 | 15,246 | 17,490 |
2018 | 22,220 | 22,220 |
2019 | 10,038 | 18,586 |
2034 | 984 | 984 |
Total Undiscounted FDC | 62,638 | 73,429 |
Pricing Assumptions
The reserve evaluation was based on Sproule’s forecast pricing and foreign exchange rates, as at December 31, 2015, as outlined in the following table.
Summary of Pricing Assumption as of December 31, 2015(1)(2)(3)(4)(5)
Forecast Prices | ||||||
Western Canada Select 20.5° API |
Natural Gas Alberta AECO-C Spot |
Exchange Rate(2) |
Edmonton Propane |
Edmonton Butane |
Edmonton Pentanes Plus |
|
($Cdn/Bbl)(4) | ($Cdn/MMBtu)(5) | ($Cdn/bbl) | ($Cdn/bbl) | ($Cdn/bbl) | ($US/$CDN) | |
Forecast(3) | ||||||
2016 | 55.20 | 2.25 | 59.10 | 39.09 | 9.09 | 0.75 |
2017 | 69.00 | 2.95 | 73.88 | 51.43 | 13.64 | 0.80 |
2018 | 78.43 | 3.42 | 83.98 | 58.46 | 25.84 | 0.83 |
2019 | 89.41 | 3.91 | 95.73 | 66.64 | 35.35 | 0.85 |
2020 | 91.71 | 4.20 | 98.19 | 68.35 | 42.30 | 0.85 |
2021 | 93.08 | 4.28 | 99.66 | 69.38 | 42.94 | 0.85 |
Thereafter Escalation Rate of 1.5% (crude oil) and 1.76% (natural gas) | ||||||
Notes:
- This summary table identifies benchmark reference pricing schedules that might apply to a reporting issuer.
- The exchange rate used to generate the benchmark reference prices in this table.
- As at December 31, 2015.
- The price received for the Company’s oil, which is considered to be medium gravity crude oil, has historically corresponded very closely to Western Canada Select 25° API ($Cdn/Bbl).
- The price received for the Company’s natural gas has historically corresponded to AECO-C Spot pricing ($Cdn/MMBtu), adjusted for heat value and transportation.
2016 Guidance
On February 22, 2016, Granite announced its 2016 guidance. The Company included two sustainable budget scenarios, a US$37.00/bbl WTI case and a US$32.50/bbl WTI case. Under the $37.00 case, Granite anticipates production of 3,250 bbl per day of oil, while funding both capital of $14.2 million (six wells) and dividends of $12.8 million, with anticipated cash flow of $27.1 million. Under the US$32.50/bbl WTI case, the Company expects oil production to average 3,000 bbl per day of oil, cash flow of $23.0 million, with capex of $10.2 million (four wells), and the annual dividend of $12.8 million. Under both scenarios, Granite retains its balance sheet flexibility with less than $40 million of net debt forecast by the end of 2016. Granite has the ability to react quickly and increase its capital program with higher commodity prices and is encouraged by recent oil price movements.
Granite’s key operational initiative during 2016 is to bring on additional gas compression to ramp up natural gas injection and achieve a voidage replacement ratio (“VRR”; Calculated as total volume injected/total volume produced) of 100%. Granite remains on-track to bring on its additional gas compression equipment by early in the second quarter of 2016. The Company is targeting an exit 2016 decline rate of 16-18% as a result of this additional gas injection, which will improve returns in all economic environments.
Reconciliation of Reserve Information
The following table sets forth a reconciliation of the changes in gross total Company working interest reserve volumes as at December 31, 2015, against such gross reserves as at December 31, 2014, based on the forecast prices and costs assumptions. The gross total Company working interest reserve volumes as at December 31, 2014, includes the oil and gas properties that were conveyed to Boulder Energy Ltd. as part of the Reorganization.
Reconciliation of Company Gross Reserves by Product Type as of December 31, 2015 – Including Properties Conveyed to Boulder Energy Ltd.
Factors | Light and Medium Oil | Heavy Oil | Associated and Non-Associated Gas | Natural Gas Liquids | BOE | ||||||||||
Gross Proved (Mbbl) | Gross Probable (Mbbl) | Gross Proved Plus Probable (Mbbl) | Gross Proved (Mbbl) | Gross Probable (Mbbl) | Gross Proved Plus Probable (Mbbl) | Gross Proved (MMcf) | Gross Probable (MMcf) | Gross Proved Plus Probable (MMcf) | Gross Proved (Mbbl) | Gross Probable (Mbbl) | Gross Proved Plus Probable (Mbbl) | Gross Proved (MBOE) | Gross Probable (MBOE) | Gross Proved Plus Probable (MBOE) | |
December 31, 2014 | 23,368.4 | 11,777.7 | 35,146.1 | 0.0 | 0.0 | 0.0 | 55,592.0 | 21,674.0 | 77,266.0 | 2,652.4 | 1,023.0 | 3,675.4 | 35,286.1 | 16,413.0 | 51,699.2 |
Product Type | (398.4) | (262.2) | (660.6) | 398.4 | 262.2 | 660.6 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Transfer Extensions | 89.4 | 232.0 | 321.4 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 89.4 | 232.0 | 321.4 |
Infill Drilling | 340.4 | 71.4 | 411.8 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 340.4 | 71.4 | 411.8 |
Improved Recovery | 725.0 | 775.0 | 1,500.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 725.0 | 775.0 | 1,500.0 |
Technical Revisions | 1,039.6 | (1,138.6) | (99.0) | 8.3 | (20.1) | (11.8) | 461.0 | 754.0 | 1,215.0 | (111.6) | (43.7) | (155.3) | 1,013.2 | (1,076.8) | (63.6) |
Discoveries | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Acquisitions | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Dispositions | (14,456.6) | (6,192.9) | (20,649.5) | 0.0 | 0.0 | 0.0 | (41,864.0) | (16,437.0) | (58,301.0) | (2,357.2) | (909.0) | (3,266.2) | (23,791.1) | (9,841.4) | (33,632.5) |
Economic Factors | (42.2) | (28.0) | (70.2) | (7.2) | (1.9) | (9.1) | (340.0) | (33.0) | (373.0) | 0.0 | 0.0 | 0.0 | (106.1) | (35.4) | (141.5) |
Production | (1,924.8) | 0.0 | (1,924.8) | (27.9) | 0.0 | (27.9) | (2,249.0) | 0.0 | (2,249.0) | (63.2) | 0.0 | (63.2) | (2,390.6) | 0.0 | (2,390.6) |
December 31, 2015 | 8,740.8 | 5,234.4 | 13,975.2 | 371.6 | 240.2 | 611.8 | 11,601.0 | 5,958.0 | 17,559.0 | 120.4 | 70.3 | 190.7 | 11,166.3 | 6,537.9 | 17,704.2 |
The following table sets forth a reconciliation of the changes in gross total Company working interest reserve volumes as at December 31, 2015, against the gross working interest reserve volumes of the Company’s Alberta Bakken property as at January 1, 2015, based on the forecast prices and costs assumptions. The gross working interest reserve volumes as at January 1, 2015, does not include the oil and gas properties that were conveyed to Boulder Energy Ltd. as part of the Reorganization.
Reconciliation of Company Gross Reserves by Product Type as of December 31, 2015 – Excluding Properties Conveyed to Boulder Energy Ltd.
Factors | Light and Medium Oil | Heavy Oil | Associated and Non-Associated Gas | Natural Gas Liquids | BOE | ||||||||||
Gross Proved (Mbbl) | Gross Probable (Mbbl) | Gross Proved Plus Probable (Mbbl) | Gross Proved (Mbbl) | Gross Probable (Mbbl) | Gross Proved Plus Probable (Mbbl) | Gross Proved (MMcf) | Gross Probable (MMcf) | Gross Proved Plus Probable (MMcf) | Gross Proved (Mbbl) | Gross Probable (Mbbl) | Gross Proved Plus Probable (Mbbl) | Gross Proved (MBOE) | Gross Probable (MBOE) | Gross Proved Plus Probable (MBOE) | |
December 31, 2014 | 8,133.7 | 5,584.8 | 13,718.5 | 0.0 | 0.0 | 0.0 | 12,061.0 | 5,237.0 | 17,298.0 | 240.0 | 114.0 | 354.0 | 10.383.9 | 6,571.6 | 16,955.5 |
Product Type Transfer | (398.4) | (262.2) | (660.6) | 398.4 | 262.2 | 660.6 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Extensions | 89.4 | 232.0 | 321.4 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 89.4 | 232.0 | 321.4 |
Infill Drilling | 340.4 | 71.4 | 411.8 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 340.4 | 71.4 | 411.8 |
Improved Recovery | 725.0 | 775.0 | 1,500.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 725.0 | 775.0 | 1,500.0 |
Technical Revisions | 1,039.6 | (1,138.6) | (99.0) | 8.3 | (20.1) | (11.8) | 461.0 | 754.0 | 1,215.0 | (111.6) | (43.7) | (155.3) | 1,013.2 | (1,076.8) | (63.6) |
Discoveries | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Acquisitions | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Dispositions | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Economic Factors | (42.2) | (28.0) | (70.2) | (7.2) | (1.9) | (9.1) | (340.0) | (33.0) | (373.0) | 0.0 | 0.0 | 0.0 | (106.1) | (35.4) | (141.5) |
Production | (1,146.7) | 0.0 | (1,146.7) | (27.9) | 0.0 | (27.9) | (581.0) | 0.0 | (581.0) | (8.0) | 0.0 | (8.0) | (1,279.4) | 0.0 | (1,279.4) |
December 31, 2015 | 8,740.8 | 5,234.4 | 13,975.2 | 371.6 | 240.2 | 611.8 | 11,601.0 | 5,958.0 | 17,559.0 | 120.4 | 70.3 | 190.7 | 11,166.3 | 6,537.9 | 17,704.2 |
March Dividend
Granite is pleased to announce that a dividend of $0.035 per common share will be paid in cash on April 15, 2016, to shareholders of record on March 31, 2016, with an ex-dividend date of March 29, 2016. This dividend has been designated as an “eligible dividend” for Canadian income tax purposes.
2015 Year End Reporting
The Company will report its 2015 year end results on March 21, 2016.