\CALGARY, Feb. 23, 2017 /CNW/ – Questerre Energy Corporation (“Questerre” or the “Company”) (TSX,OSE:QEC) reported today on its fourth quarter 2016 results and preliminary financial and operating results for the year ended December 31, 2016. The Company also reported certain results of its December 31, 2016 Reserves Assessment and Evaluation of its oil and natural gas properties, as evaluated by McDaniel & Associates Consultants Ltd.(“McDaniel”) with an effective date of December 31, 2016, prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (the “Report”).
Michael Binnion, President and Chief Executive Officer, commented, “Despite a challenging start, 2016 turned out to be very good year. The passage of modern hydrocarbon legislation in Quebec after six years of public consultations and studies was a huge breakthrough. The updated Quebec resource assessment including the assignment of economic contingent resources supports the significant economic potential of our acreage.”
He added, “We also saw positive results in the Montney. Although we selectively participated in new wells to preserve liquidity last year, the results from longer wells with improved completions have contributed to an improvement in our type curves. Our proved and probable EUR (expected ultimate recovery) for new locations, as estimated in the Report, has increased to 1.01 MMboe from 0.93 MMBoe last year. The results adjacent to our operated acreage at Kakwa North were also very encouraging. They have resulted in additional locations being booked on both our operated and non-operated acreage.”
He further added, “Based on these results, we plan to participate in up to 8 (2.0 net) additional wells at Kakwa in 2017. In Quebec, we are looking forward to the introduction of the new environmental law and the hydrocarbon regulations. We also plan to continue our step by step approach with a focus on local acceptability.”
2016 Highlights
- Quebec government endorses new hydrocarbon legislation
- Quebec resource assessment includes best estimate of risked economic contingent resources of 314 Bcf (52 million boe) with a risked NPV-10 of $424 million(1)
- Jordan resource assessment best estimate of discovered petroleum initially in place of between 7.8 billion barrels to 12.2 billion barrels(1)
- Corporate total proved plus probable reserves of 15.78 MMboe with a before income tax NPV-10% of $155.59 million
- Adjusted funds flow from operations of $7.05 million with average daily production of 1,373 boe/d for the year
(1) |
For more information regarding the resource assessments, please see the Company’s press releases dated October 27, 2016 and February 8, 2017. There is no certainty that it will be commercially viable to produce any portion of the resources. |
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Commenting on the Company’s oil shale assets, he noted, “The updated resource assessment for our oil shale acreage in Jordan confirmed the existence of a significant deposit. Our focus this year is to assess the feasibility of commercially developing this acreage using well established technologies.”
Regarding the Company’s 2016 year-end reserve assessment he added, “Corporate total proved plus probable gross reserves grew by over 20% or 3.4 MMBoe from 12.92 MMBoe to 15.78 MMBoe, net of production during the year. This growth has been entirely in the Montney which currently represents approximately 90% of our total reserves. The before tax NPV-10% estimated for the corporate proved and probable reserves using McDaniel’s year-end 2016 price forecast is $155.59 million.”
For the year ended December 31, 2016, the Company reported adjusted funds flow from operations of $7.05 million (2015: $9.78 million) and $1.94 million for the fourth quarter (2015: $2.27 million). Production averaged 1,373 boe/d for the year (2015: 1,582 boe/d) with a 58% oil and liquids weighting unchanged from the prior year and 1,261 boe/d for the fourth quarter (2015: 1,648 boe/d). As at December 31, 2016, the Company reported a working capital deficit of $17.02 million (2015: $21.48 million).
For the year ended December 31, 2016, the Company reported net income before taxes of $0.61 million (2015: loss of $71.41 million). The net income before taxes for 2016 includes the reversal of the impairment charge of $23.5 million incurred in 2015 relating to its Quebec assets in light of the passage of the hydrocarbon legislation in the province and its updated resource assessment. In 2015, the Company incurred an impairment charge of $69.62 million reflecting write-downs in the value of its investment in Red Leaf and impairments in the carrying value of its producing assets and exploration and evaluation assets due to, among other factors, commodity prices.
The Company also reported on the status of its credit facility review that was conducted in the fourth quarter of 2016. The lender has advised that the primary credit facility will be renewed at $23 million from $25 million. The facility will include a $22.9 million revolving operating demand facility (“Credit Facility A”). Credit Facility A can be used for general corporate purposes, ongoing operations, capital expenditures within Canada, and acquisition of petroleum and natural gas assets within Canada.
In accordance with the requirements of National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators, the Company anticipates filing its Annual Information Form that includes more detailed disclosure relating to petroleum and natural gas activities for the 2016 fiscal year at the end of March 2017 as set out in the Report.
SUMMARY OF OIL AND GAS RESERVES |
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as of December 31, 2016 |
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FORECAST PRICES AND COSTS |
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LIGHT AND MEDIUM CRUDE OIL |
CONVENTIONAL NATURAL GAS |
SHALE |
NATURAL GAS |
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RESERVES CATEGORY |
Gross(1) (Mbbl) |
Net(2) (Mbbl) |
Gross(1) (MMcf) |
Net(2 (MMcf) |
Gross(1) (MMcf) |
Net(2) (MMcf) |
Gross(1) (Mbbl) |
Net(2) (Mbbl) |
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Proved |
||||||||||||||||
Developed Producing |
705.0 |
669.2 |
332.9 |
317.5 |
3,862.3 |
3,585.9 |
747.6 |
576.0 |
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Developed Non-Producing |
56.1 |
46.6 |
293.1 |
261.5 |
813.5 |
743.3 |
173.1 |
138.4 |
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Undeveloped |
296.4 |
280.9 |
– |
– |
16,836.0 |
15,062.0 |
3,288.6 |
2,712.6 |
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Total Proved |
1,057.4 |
996.7 |
626.0 |
579.0 |
21,511.8 |
19391.2 |
4209.4 |
3427.0 |
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Probable |
398.9 |
375.1 |
258.2 |
232.4 |
20,705.2 |
18,583.1 |
2936.1 |
2285.8 |
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Total Proved Plus Probable |
1,456.3 |
1,371.9 |
884.2 |
811.4 |
42,217.0 |
37,974.3 |
7145.5 |
5712.8 |
(1) |
Gross reserves are working interest reserves before royalty deductions. |
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(2) |
Net reserves are working interest reserves after royalty deductions plus royalty interest reserves. |
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SUMMARY NET PRESENT VALUES OF FUTURE NET REVENUE |
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as of December 31, 2016 |
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FORECAST PRICES AND COSTS |
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BEFORE INCOME TAXES DISCOUNTED AT (%/YEAR) |
AFTER INCOME TAXES DISCOUNTED AT (%/YEAR) |
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RESERVES |
0% (M$) |
5% (M$) |
10% (M$) |
15% (M$) |
20% (M$) |
0% (M$) |
5% (M$) |
10% (M$) |
15% (M$) |
20% (M$) |
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Proved |
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Developed Producing |
61.3 |
48.9 |
40.5 |
34.6 |
30.3 |
61.3 |
48.9 |
40.5 |
34.6 |
30.3 |
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Developed Non‑Producing |
9.9 |
8.3 |
7.3 |
6.5 |
5.9 |
9.9 |
8.3 |
7.3 |
6.5 |
5.9 |
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Undeveloped |
95.7 |
58.0 |
35.1 |
20.5 |
10.8 |
95.7 |
58.0 |
35.1 |
20.5 |
10.8 |
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Total Proved |
166.9 |
115.2 |
82.8 |
61.6 |
47.1 |
166.9 |
115.2 |
82.8 |
61.6 |
47.1 |
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Probable |
156.7 |
103.1 |
72.8 |
54.1 |
41.7 |
140.8 |
95.9 |
69.3 |
52.3 |
40.8 |
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Total Proved Plus Probable |
323.6 |
218.3 |
155.6 |
115.7 |
88.8 |
307.7 |
211.1 |
152.1 |
113.9 |
87.9 |
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SUMMARY OF PRICE FORECASTS |
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Year |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
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AECO Spot Price ($C/MMBtu) |
3.40 |
3.15 |
3.30 |
3.60 |
3.90 |
3.95 |
4.10 |
4.25 |
4.30 |
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Edmonton Light Crude Oil ($C/bbl) |
69.80 |
72.70 |
75.50 |
81.10 |
86.60 |
88.30 |
90.00 |
91.80 |
93.70 |
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Questerre Energy Corporation is leveraging its expertise gained through early exposure to shale and other non-conventional reservoirs. The Company has base production and reserves in the tight oil Bakken/Torquay of southeast Saskatchewan. It is bringing on production from its lands in the heart of the high-liquids Montney shale fairway. It is a leader on social license to operate issues for its Utica shale gas discovery in the St. Lawrence Lowlands, Quebec. It is pursuing oil shale projects with the aim of commercially developing these significant resources.
Questerre is a believer that the future success of the oil and gas industry depends on a balance of economics, environment and society. We are committed to being transparent and are respectful that the public must be part of making the important choices for our energy future.