CALGARY, ALBERTA–(Marketwired – Feb. 15, 2017) – Gear Energy Ltd. (“Gear” or the “Company”) (TSX:GXE) is pleased to present the following results and analysis of its 2016 year-end independent reserve report prepared by GLJ Petroleum Consultants Ltd. (“GLJ”).
In 2016 Gear invested $71.7 million (unaudited) consisting of $14.4 million of development capital and $57.3 million in acquisition and divestiture (“A&D”) activity. The development capital represented one-half of operating cash flow with the balance directed to strengthening the company’s balance sheet. The A&D capital was almost entirely related to the corporate acquisition of Striker Exploration Corp. (“Striker”) on July 27, 2016. The acquisition was funded through a combination of equity issuance and assumption of debt.
- Gear achieved the following reserves highlights through 2016 activity:
|Proved Developed Producing (“PDP”)|
|•||4.68 MMboe of additions at a Finding, Development and Acquisition (“FDA”) cost of $15.13/boe including change in Future Development Capital (“FDC”)|
|•||Reserves increased 64%, or 2% per debt adjusted share|
|•||Replaced 250% of 2016 annual production|
|•||Recycle ratio of 1.0x based on 2016 operating netback of $15.50/boe, or 1.6x based on estimated 2017 operating netback of $24.29/boe at current strip pricing|
|Total Proved (“TP”)|
|•||7.25 MMboe of additions at an FDA cost of $15.30/boe including change in FDC|
|•||Reserves increased 64%, or 2% per debt adjusted share|
|•||Replaced 390% of 2016 annual production|
|•||Recycle ratio of 1.0x on 2016 netback, or 1.6x on 2017 forecasted netback|
|Proved plus Probable (“P+P”)|
|•||11.22 MMboe of additions at an FDA cost of $11.67/boe including change in FDC|
|•||Reserves increased 56%, or decreased by 3% per debt adjusted share|
|•||Replaced 600% of 2016 annual production|
|•||Recycle ratio of 1.3x on 2016 netback, or 2.1x on 2017 forecasted netback|
- The Striker acquisition at a cost of $55.2 million in July added TP reserves of 6.62 MMboe and P+P reserves of 10.48 MMboe. At year-end the purchase price plus capital spent by Gear on the Striker assets net of 2016 cash flow was very nearly equal to the year-end before tax 10 percent discounted PDP value assigned to the assets by GLJ of $54.5 MM. The discounted TP and P+P values represented premiums of 48% and 131%, respectively, relative to the original purchase price.
- Increased Corporate Net Asset Values (“NAV”) at a 10 per cent discount factor to $0.90 per share for TP and $1.89 per share for P+P utilizing the GLJ January, 2017 price forecast, representing a respective 84% and 14% improvement over the prior year.
- Company Reserves Life Index (“RLI”) increased by 16 per cent for TP to 5.9 years, and increased by 8 per cent for P+P to 9.7 years.
- Management’s estimate of future potential inventory increased to 481 net drilling locations. The GLJ evaluation currently recognizes 74 net locations in the TP category and 153 in the P+P category. These booked locations represent only 15 and 32 per cent of the management estimates, respectively. The 153 net booked P+P locations includes 43 multi-lateral horizontals, 84 single horizontals and 25 vertical wells.
Year-end 2016 reserves were evaluated by independent reserves evaluator GLJ 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”). A reserves committee, comprised of independent board members, reviews the qualifications and appointment of the independent reserves evaluator and reviews the procedures for providing information to the evaluators. The reserves evaluation was based on GLJ forecast pricing and foreign exchange rates at January 1, 2017. Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without inclusion of any royalty interests) unless noted otherwise. Additional reserves information required under NI 51-101 will be included in Gear’s Annual Information Form to be filed on SEDAR on or before March 31, 2017.
The following tables outline Gear’s reserves as at December 31, 2016. No provision for interest, risk management contracts, debt service charges and general and administrative expenses have been made and it should not be assumed that the NPV estimated by GLJ represents the fair market value of the reserves.
Reserves Summary at Dec 31, 2016 Using GLJ January 1, 2017 Forecast Prices and Costs
|Company Gross||Light & Medium Oil
|Natural Gas (MMcf)||Equivalent
|Liquids Ratio (%)|
|Proved Developed Producing||1,921||3,289||445||9,382||7,219||78|
|Proved Non-Producing & Undeveloped||1,755||3,238||282||7,785||6,573||80|
|Total Proved plus Probable||6,006||13,862||1,225||29,267||25,971||81|
Net Present Value of Future Revenues Before Income Taxes Under Forecast Prices and Costs
|($ thousands)||@ 5%||@ 10%||@ 15%||@ 20%|
|Proved Developed Producing||156,222||138,545||124,916||114,119||105,357|
|Proved Non-Producing & Undeveloped||128,643||99,179||78,245||62,992||51,562|
|Total Proved plus Probable||627,751||486,424||394,648||330,738||283,844|
Net Future Development Costs (“FDC”) Under Forecasted Prices and Costs
|Discounted at 10%||70,031||54,976||125,008|
The following table highlights annual capital efficiency through finding and development (“F&D”) and FD&A costs per boe metrics.
|Reserves (mboes), Capital ($ thousands)||Proved||Proved plus Probable||Proved||Proved plus Probable|
|Development Reserves Additions||661||1,351||(860)||(1,657)|
|Net Acquisition Reserves Additions||6,584||9,871||0||0|
|Total Reserves Additions||7,245||11,222||(860)||(1,657)|
|Development change in FDC||1,462||10,586||(27,541)||(49,824)|
|Total development capital including FDC||15,884||25,008||(12,657)||(39,940)|
|Net acquisition capital||57,261||57,261||(686)||(686)|
|Net acquisition change in FDC||37,674||48,685||0||0|
|Total net acquisition capital including FDC||94,935||105,946||(686)||(686)|
|Total change in FDC||39,136||59,271||(27,541)||(49,824)|
|Total capital including FDC||110,819||130,954||(13,343)||(35,626)|
|F&D costs with FDC per boe||24.03||18.51||– (1)||– (1)|
|FD&A costs with FDC per boe||15.30||11.67||– (1)||– (1)|
|3 Year average FD&A including FDC per boe||– (1)||– (1)||– (1)||– (1)|
|Recycle ratio (FD&A with FDC)||1.0||1.3||– (1)||– (1)|
|(1) Numbers from 2015 year-end are not considered meaningful as a result of negative reserve additions and negative capital including FDC, please see advisory on Oil and Gas Metrics.|
Reserves Life Index (“RLI”)
|Total Proved plus Probable||9.7||9.0||7.7|
Net Asset Value (“NAV”) at December 31, 2016
|($ millions, except per share amounts)||2016||2015||2014|
|Value of Company Interest Proved plus Probable Reserves Discounted at 10% (Before Tax)||394.6||199.4||314.1|
|Shares Outstanding (millions)||192.6||85.5||70.8|
|NAV per Share||1.89||1.66||3.24|