HALIFAX, NOVA SCOTIA–(Marketwired – June 16, 2016) – Corridor Resources Inc. (TSX:CDH) (“Corridor”) announced today an update to the reserves set forth in the “Statement of Reserves Data and Other Oil and Gas Information” in Corridor’s Annual Information Form for the year ended December 31, 2015 (the “Statement of Reserves”). The Statement of Reserves summarizes the reserves report of GLJ Petroleum Consultants Ltd. (“GLJ”) for Corridor’s properties in the McCully Field and the Caledonia Field in New Brunswick as at December 31, 2015 (the “Original Reserves Report”) and was prepared in accordance with the COGE Handbook and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”).
On May 27, 2016, the Government of New Brunswick announced its decision to continue a moratorium on hydraulic fracturing for an indefinite period (the “NB Decision”). In light of this announcement, Corridor engaged GLJ to assess the extent of the impact of the NB Decision on Corridor’s reserves as set forth in the Original Reserves Report. For clarity, all of the undrilled wells and several standing wells in the McCully area in the Original Reserves Report contemplated the use of hydraulic fracture stimulations, as such wells could not be made commercially productive otherwise.
Section 5.5 (i.e. Regulatory Considerations) of the COGE Handbook states that … “For proved reserves, regulatory approval must be virtually certain.” and “For probable reserves, approval must be highly likely“. As a result of the NB Decision, Corridor, in consultation with GLJ, no longer considers that the undeveloped wells requiring hydraulic fracture stimulations in New Brunswick meet the necessary conditions set out in NI 51-101 to qualify as reserves. GLJ has advised that such wells would, however, qualify as Contingent Resources in the Project Maturity subclass of “development on hold.”
On June 15, 2016, GLJ provided Corridor with an updated reserves report incorporating the impact of the NB Decision on Corridor’s reserves and the value of reserves as if the NB Decision had been announced prior to December 31, 2015 (the “Updated Reserves Report”). The Updated Reserves Report was prepared in accordance with the COGE Handbook and NI 51-101, and continues to be effective as of December 31, 2015, subject to amendments to reflect the impact on reserves resulting from the NB Decision. In accordance with Part 6 of NI 51-101, Corridor is providing an update to the Statement of Reserves, as set out in Schedule “A”.
The Updated Reserves Report demonstrates that the NB Decision has resulted in a material reduction in Corridor’s undeveloped reserves, future development capital and associated net present value of future revenue. Below is a table providing a reconciliation of the Updated Reserves Report to the Original Reserves Report, both of which are effective as of December 31, 2015. Please note that rounding errors may occur in the table set forth below.
The Updated Reserves Report shows a decrease of 23.1 bscf in proved reserves and 38.8 bscf in proved plus probable reserves. The net present value before income tax discounted at 10% for proved reserves decreases by $13.3 million and by $32.4 million for proved plus probable reserves.
Reserves Reconciliation – Updated Reserves Report to Original Reserves Report
|Net Corridor WI Reserves Reconciliation Effective December 31, 2015||Proved
|Total Natural Gas Reserves (Bcf)|
|Original Reserves Report||18.6||23.3||41.9||19.9||61.8||107.2||169.0|
|Updated Reserves Report||18.6||0.2||18.8||4.2||22.9||5.0||28.0|
|Change (% )||0.0%||-99.1%||-55.2%||-79.1%||-62.9%||-95.3%||-83.4%|
|Boe Equivalent Reserves (MM Boe)|
|Original Reserves Report||3.1||4.0||7.1||3.4||10.5||18.1||28.6|
|Updated Reserves Report||3.1||0.1||3.2||0.7||4.0||0.9||4.9|
|Change (% )||0.0%||-96.9%||-54.5%||-78.1%||-62.1%||-95.1%||-82.9%|
|Future Development Capital (MM $)|
|Original Reserves Report||$2.7||$60.5||$63.2||$13.8||$77.0||$71.0||$148.0|
|Updated Reserve Report||$2.7||$0.9||$3.5||$0.0||$3.5||$0.1||$3.6|
|Net Present Value Before Income Tax|
|Discounted at 10% per year (MM $)|
|Original Reserves Report||$35.8||$16.7||$52.5||$26.5||$79.0||$106.6||$185.6|
|Updated Reserves Report||$35.8||$3.4||$39.3||$7.3||$46.6||$5.9||$52.5|
|Change (% )||0.0%||-79.5%||-25.3%||-72.3%||-41.0%||-94.4%||-71.7%|
Corridor expects the reduction in the net present value of its proved plus probable reserves calculated at a discount factor of 10% will lead to an impairment loss. The final calculation of such loss will be disclosed in Corridor’s second quarter financial statements, currently planned for release on August 11, 2016.
Corridor is an Eastern Canadian junior resource company engaged in the exploration for and development and production of petroleum and natural gas onshore in New Brunswick and Québec and offshore in the Gulf of St. Lawrence. Corridor currently has natural gas production and reserves in the McCully Field near Sussex, New Brunswick. In addition, Corridor has a 21.67% interest in Anticosti Hydrocarbons, a joint venture which has undiscovered resources on Anticosti Island, Québec.