CALGARY, ALBERTA–(Marketwired – Feb. 9, 2017) – 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, 2016 (the “Sproule Report”). The following highlights, reserves summary and strong capital efficiency metrics are directly attributable to Crew’s successful 2016 Montney drilling program.
- Strong capital efficiencies and recycle ratios were achieved resulting in finding, development and acquisition (“FD&A”) costs and finding and development (“F&D”) costs, including changes in future development capital (“FDC”), as follows:
- Total proved plus probable (“2P”) FD&A costs were $5.57 per boe with a recycle ratio of 3.1 times and F&D costs were $5.65 per boe with a recycle ratio of 3.0 times;
- Total proved (“1P”) FD&A costs of $6.19 per boe, leading to a recycle ratio of 2.8 times and F&D costs of $6.30 per boe, with a recycle ratio of 2.7 times;
- Proved developed producing (“PDP”) F&D costs (including FDC) were $9.35 per boe in 2016 with a recycle ratio of 1.8 times, compared to $12.87 per boe in 2015, and $22.43 per boe in 2014, a reduction of 27% and 58%, respectively. PDP FD&A costs were $8.68 per boe, leading to a recycle ratio of 2.0 times;
- Three year average F&D costs, including FDC, continued to decline reflecting improved capital efficiencies and the ongoing transformation to a lower-cost, high-netback, Montney-focused producer. Crew’s three year average 1P and 2P F&D costs per boe were $9.15 and $7.39 in 2016, a reduction of 17% and 12%, respectively, compared to 2015 and were 37% and 25% lower, respectively, relative to 2014;
- Reserves increased meaningfully across all categories with significant reserves replacement net of annual production of 8,361 mboe:
- PDP reserves increased 11% to 46.0 mmboe, replacing 154% of produced reserves;
- 1P reserves increased 26% to 153.2 mmboe, replacing 482% of produced reserves;
- 2P reserves increased 24% to 323.9 mmboe, replacing 857% of produced reserves;
- Reserves per share improved across each reserves category, increasing 19% on 2P, 21% on 1P and 7% on PDP;
- The net present value discounted at 10% (before tax) (“NPV10 BT”) of 1P reserves increased by 20% to $1,011 million, and 2P reserves increased by 21% to $2,012 million relative to December 31, 2015; and
- Longer term development was supported with a 32% increase in 2P booked undeveloped future Montney drilling locations in the Sproule report to a total of 356 potential drilling locations.
To view the graphs associated with this release, please visit the following link: http://media3.marketwire.com/docs/1085477b.pdf
The continuing strength in reserves additions and metrics highlighted above reflect the high-quality nature of Crew’s Montney assets and demonstrate our ability to effectively deploy capital and generate value through ongoing weak and volatile commodity prices.
During 2016 Crew’s primary focus was on development of our liquids-rich West Septimus area, resulting in 1P and 2P reserves increasing 66% to 81.0 mmboe and 53% to 154.8 mmboe, respectively compared to year end 2015. A further highlight for West Septimus was the delineation of the ultra-liquids rich portion of the reservoir where area well control and the performance of our first two wells resulted in 41 locations booked in the 2P undeveloped reserves category. Based on the estimated ultimate recovery (“EUR”) assignment by Sproule of 3.7 bcf of natural gas, 239 mbbls of condensate and a 2016 capital cost of $4.3 million per well, wells in this ultra liquids-rich area are capable of generating rates of return in excess of 150% utilizing Sproule’s December 31, 2016 price deck. These strong economics are further supported by an operating netback from our first well of approximately $29.00 per boe realized over the last four months of 2016. Our internal analysis supports up to 165 potential drilling opportunities within this ultra liquids-rich window subject to further delineation of the local reservoir quality and productivity.
At Septimus, Crew has maintained the 5.6 bcf average 2P EUR per well for booked undeveloped locations consistent with 2015, a 100% increase over the original 2.8 bcf average 2P EUR per well assigned by Crew’s independent reserve evaluator at year end 2010. In 2016 Crew began exploiting a new Upper Montney stratigraphic interval located within the lower portion of the “B” unit at Septimus with the drilling of two wells. Both wells had strong initial production results and have been assigned an average 2P EUR of 6.7 bcf per well in the Sproule Report. With continued exploitation of this interval and the Company’s ongoing focus on technology enhancements and implementation, we expect continued strong well performance from our legacy Septimus asset.
Continuing strong performance of Crew’s original Lower Montney well at Septimus resulted in a 17% increase in the 2P EUR reserve assignment to 5.6 bcf for this well, further demonstrating the significant potential of this largely unbooked resource. The Company will continue to pursue an optimal completion design for the Lower Montney as we further delineate this interval across our land base.
Crew’s 2016 reserves evaluation reflects a successful drilling program highlighted by a growing potential drilling inventory with 171 proved undeveloped Montney locations and 356 2P undeveloped Montney locations assigned in the Sproule report, representing an increase of 41% and 32%, respectively, over 2015. The land represented by this significant inventory is only approximately 14% of Crew’s total Montney land holdings, providing for multi-decades of potential development. Crew has established a three year growth plan which targets strong production increases over the next 36 months to an estimated 60,000 boe per day through the end of 2019, which based on current EUR per well assignments, could potentially be achieved through developing the currently booked 1P undeveloped reserves. Crew’s $200 million 2017 capital budget is planned to be allocated approximately 90% to Montney drilling and completions activities and associated infrastructure expansion, which is anticipated to result in Montney production growth of more than 40% while exiting the year at greater than 30,000 boe per day.
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, 2016. 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, 2016 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 31, 2017.
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 2016 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:|
|Reserves Added(1) (mmboe)||12.9||40.3||71.7|
|Total Reserves (mmboe)||46.0||153.2||323.9|
|NPV10 BT ($mm)||$459||$1,011||$2,012|
|FD&A Cost per boe(2)(5)||$8.68||$6.19||$5.57|
|F&D Cost per boe (2)(5)||$9.35||$6.30||$5.65|
|Reserves per Share Growth(4)(5)||7%||21%||19%|
|(1)||Net of 8.4 mmboe of production|
|(2)||Including changes in FDC|
|(3)||Based on a Q4 2016 estimated netback of $17.03 per boe (unaudited)|
|(4)||2016 over 2015, based on 146.8 million shares outstanding and 141.1 million at December 31, 2016 and 2015, respectively.|
|(5)||“Reserves Replacement”, “FD&A Cost”, “F&D Cost” and “Recycle Ratio” do not have standardized meanings. See “Information Regarding Disclosure on Oil and Gas Reserves and Operational Information” in this news release.|
|Light and Medium Crude Oil||Heavy Crude Oil||Natural Gas
|Conventional Natural Gas(3)||Barrels of
|Total proved plus probable||12,540||9,944||58,690||1,456,613||323,943|
|(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, 2016 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, 2016 and based on the Sproule Report and the published Sproule (December 31, 2016) future price forecast are summarized in the following table:
|Total proved plus probable||5,666,557||3,162,734||2,012,487||1,393,005||1,021,295|
|(1)||The estimated future net revenues are stated prior to provision for interest, debt service charges, general administrative expenses, the impact of hedging activities, and after deduction of royalties, operating costs, certain estimated well abandonment and reclamation costs and estimated future capital expenditures.|
|(2)||The after-tax present values of future net revenue attributed to Crew’s reserves will be included in the Company’s 2016 Annual Information Form to be filed on or before March 31, 2017.|
|(3)||Columns may not add due to rounding.|
The Sproule December 31, 2016 price forecast is summarized as follows:
|Year||Exchange Rate||WTI @ Cushing||Canadian Light Sweet||Western Canada Select||Natural gas AECO-C spot||Westcoast Station 2|
|(1)||Inflation is accounted for at 2.0% per year.|
The following summary reconciliation of Crew’s gross reserves compares changes in the Company’s reserves as at December 31, 2016 to the reserves as at December 31, 2015 based on the Sproule (December 31, 2016) future price forecast.
|TOTAL PROVED||Light & Medium Crude Oil (mbbl)||Heavy
|Natural Gas Liquids
|Conventional Natural Gas (mmcf)||Oil Equivalent (mboe)|
|Extensions & Improved Recovery(1)||327||41||46||1,779||711|
|PROVED PLUS PROBABLE||Light & Medium Crude Oil (mbbl)||Heavy
|Natural Gas Liquids
|Conventional Natural Gas (mmcf)||Oil Equivalent (mboe)|
|Extensions & Improved Recovery(1)||4,148||214||615||23,564||8,904|
|(1)||Increases to Extensions and Improved Recovery are the result of step-out locations drilled by Crew. Reserves additions for improved recovery and extensions are combined and reported as “Extensions and Improved Recovery”.|
|(2)||Columns may not add due to rounding.|
Capital Program Efficiency
In 2016, Crew achieved strong success in our drilling program, and continued to benefit from improvements in completions technologies aided by strong reservoir performance. Crew’s exploration and development capital expenditures in 2016 are estimated at $108.2 million.
The following table provides an overview of Crew’s ability to invest capital efficiently, and generate positive returns from our assets for the years ended December 31, 2016 and 2015, along with three year averages:
|Exploration and Development expenditures(1) ($ thousands)||108,202||108,202||209,546||209,546||601,720||601,720|
|Acquisitions/(Dispositions)(1) ($ thousands)||3,974||3,974||(48,568)||(48,568)||(274,270)||(274,270)|
|Change in future development capital(1) ($ thousands)|
|– Exploration and Development||137,187||286,983||(139,172)||24,200||343,584||1,071,536|
|Reserves additions with revisions and economic factors (mboe)|
|– Exploration and Development||38,952||69,989||21,890||47,968||103,315||226,316|
|Finding & Development Costs(2)(6)($ per boe)|
|– with revisions and economic factors||6.30||5.65||3.22||4.87||9.15||7.39|
|Finding, Development & Acquisition Costs(2)(6) ($ per boe)|
|– with revisions and economic factors||6.19||5.57||0.95||3.86||5.95||6.21|
|Reserve Life Index based on annualized 2016 fourth quarter production (years)(5)(6)||18.8||39.7||16.1||34.5|
|(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 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.|
|(3)||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 fourth quarter 2016, used in the above calculations, averaged $17.03 per boe (unaudited).|
|(4)||Reserves replacement ratio is calculated as total reserve additions (including acquisitions net of dispositions) divided by annual production. Crew’s 2016 annual production averaged 22,844 boe per day.|
|(5)||Reserve life index (“RLI”) is calculated as Company gross reserves divided by average fourth quarter production of 22,380 boe per day annualized.|
|(6)||“Reserves Replacement”, “FD&A Cost”, “F&D Cost”, “Recycle Ratio” and “Reserve Life Index” do not have standardized meanings. See “Information Regarding Disclosure on Oil and Gas Reserves and Operational Information” in this news release|
Future Development Capital
The following table provides a summary of the estimated FDC required to bring Crew’s undeveloped reserves to production.
|Future Development Capital ($millions)(1)||Proved||plus Probable|
|Total FDC undiscounted||728||1,603|
|Total FDC discounted at 10%||541||1,167|
|1.||FDC as per Sproule independent reserve evaluation effective December 31, 2016 based on Sproule forecast pricing.|