CALGARY, Feb. 26, 2018 /CNW/ – Journey Energy Inc. (JOY – TSX) (“Journey” or the “Company“) is pleased to report its year-end 2017 oil and gas reserves evaluation. During 2017, the Company invested approximately $65 million in capital projects. Capital was evenly distributed between acquisition and divestiture (“A&D”) activities and exploration and development (“E&D”) activities. A&D initiatives throughout the year included the disposition of certain non-core assets; consolidation of working interests; acquiring infrastructure in Journey’s core properties; and a significant acquisition in the Company’s central Alberta core area.
The central Alberta core area was a key focus of corporate activities in 2017. The assets acquired were concentrated in a multi-zone area and contained significant ownership in an extensive network of underutilized infrastructure at Gilby. Subsequent to the year-end Journey acquired control of 102 sections of Duvernay shale exploration rights within the immediate area serviced by this strategic infrastructure. The lands are contiguous, and prospective for drilling two mile horizontal wells within the oil window of the western shale basin. Since these rights were acquired subsequent to year-end, there is no value ascribed to Journey’s significant Duvernay acreage position in the net asset value calculations herein.
At the end of January, 2018 Journey acquired 12.7 million common shares from a major shareholder for a cost of $21.3 million. The shares repurchased were subsequently cancelled, thereby reducing Journey’s basic shares outstanding by approximately 25%. Because of this, Journey’s net asset value comparison was done on a pro-forma basis including the impact of the share buyback.
Both the share buyback and Duvernay land acquisition was the subject of a press release issued on January 22, 2018.
Highlights:
- Proved and proved plus probable reserves increased by 24% and 26% respectively over 2016.
- Proved plus probable net asset value (pro-forma after share buyback) of $10.81 per basic share outstanding representing a 4% increase from $10.44 per share in 2016.
- Proved developed producing reserves accounted for 46% of total proved plus probable reserves while proved reserves accounting for 62%.
- Journey’s proved developed producing net asset value of $3.66 per basic share outstanding represents a significant increase from Journey’s current trading price of $1.65/share.
- Journey’s proved plus probable producing net asset value per share of $5.60 per basic was largely unchanged year over year even though commodity prices decreased significantly.
- Achieved finding, development, and acquisition (“FD&A”) costs, including changes in future development capital of:
- $7.90 per boe for proved reserves.
- $6.68 per boe for proved plus probable reserves
- Journey has achieved strong FD&A recycle ratios. For the year ended December 31, 2017, we achieved a ratio of:
- 1.6 times for FD&A costs with proved reserves.
- 1.9 times for FD&A costs with proved plus probable reserves.
- Achieved finding and development costs* (“F&D”) costs, including changes in future development capital, of:
- $29.22 per boe for proved reserves.
- $23.73 per boe for proved plus probable reserves.
*Journey’s 2017 F&D costs were negatively impacted by revisions due to declining commodity prices and by negative technical revisions, including the reduction of booked reserves in a single property in Journey’s central core area after the drilling of an unsuccessful well. Journey management feels that the reduction of these reserves is a one- time event and is not representative of Journey’s E&D program moving forward. Journey’s 2018 program is focused on continued development of 3 key pools where the company has had previous success. Two wells were drilled in the first quarter and initial test results have exceeded expectations.
- Proved plus probable reserve life index of 15.1 years, with only $3.47/boe of future development capital booked in the reserve report.
- Proved developed producing and proved plus probable developed producing reserve life index of 7.7 and 9.9 years respectively, are testaments to Journey’s low decline asset base.
COMPANY GROSS WORKING INTEREST OIL AND GAS RESERVES AND NET PRESENT VALUES
The following table provides summary information presented in the GLJ Petroleum Consultants Limited (“GLJ”) independent reserves assessment and evaluation effective December 31, 2017, (the “GLJ Report”). GLJ evaluated 100% of Journey’s crude oil, natural gas liquids (“NGL”) and natural gas reserves. The evaluation of all of its oil and gas properties was done 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”). Detailed reserve information will be presented in the Company’s upcoming Statement of Reserves Data and Other Oil and Gas Information section of the Company’s Annual Information Form scheduled to be filed on SEDAR on or before March 31, 2018.
Company Gross Reserves
Based on Forecast Price and Costs as at December 31, 2017
Light |
Heavy Oil |
Natural |
NGLs |
Total(2) |
||
Reserves Category |
(Mbbl) |
(Mbbl) |
(MMcf) |
(Mbbl) |
(Mboe) |
|
Proved |
||||||
Producing |
5,729 |
2,896 |
97,825 |
2,962 |
27,891 |
|
Developed non-producing |
110 |
5 |
4,183 |
136 |
947 |
|
Undeveloped |
2,550 |
1,485 |
20,978 |
931 |
8,462 |
|
Total proved |
8,388 |
4,386 |
122,986 |
4,028 |
37,300 |
|
Probable |
7,808 |
3,176 |
60,345 |
1,838 |
22,879 |
|
Total proved plus probable |
16,196 |
7,562 |
183,331 |
5,866 |
60,179 |
|
Included in Above |
||||||
Proved plus probable producing |
7,942 |
4,058 |
126,635 |
3,746 |
36,851 |
Notes: |
|
(1) |
Company Gross Reserves consists of Journey’s working interest (operated and non-operated) share of reserves before deduction of royalties payable and without including royalties receivable by the Company. |
(2) |
In the case of natural gas volumes, boes are derived by converting natural gas to oil using the ratio of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf:1 bbl). |
(3) |
Total values may not add due to rounding. |
Net Present Values of Future Net Revenue (Based on Forecast Prices and Costs)
Before Tax Net Present Value |
|||||||
Reserves category |
0% |
5% |
10% |
15% |
20% |
||
Proved |
|||||||
Producing |
398,189 |
309,837 |
251,747 |
212,151 |
183,843 |
||
Developed non-producing |
16,249 |
10,697 |
7,966 |
6,334 |
5,235 |
||
Undeveloped |
140,628 |
80,726 |
47,950 |
28,686 |
16,662 |
||
Total proved |
555,066 |
401,259 |
307,662 |
247,171 |
205,739 |
||
Probable |
567,334 |
334,481 |
219,504 |
154,817 |
114,766 |
||
Total proved plus probable |
1,122,401 |
735,740 |
527,166 |
401,988 |
320,505 |
||
Included in Above |
|||||||
Proved plus probable producing |
603,713 |
426,127 |
326,341 |
264,577 |
223,171 |
Notes: |
|
(1) |
Total values may not add due to rounding |
(2) |
Forecast pricing used is the average of the published price forecasts for GLJ Petroleum Consultants Ltd., Sproule Associates Ltd. and McDaniel & Associates Consultants Ltd. as at December 31, 2017. |
(3) |
It should not be assumed that the net present values of future net revenues estimated by GLJ represent fair market value of the reserves. There is no assurance that the forecast price and cost assumptions will be attained and variances could be material. |
The forecast prices and foreign exchange rates used in the GLJ Report are as follows:
WTI Cushing Oklahoma ($US/bbl) |
Edmonton 40 API |
Alberta AECO-spot ($CDN/Mmbtu) |
Foreign Exchange ($US/$CDN) |
|
2018 |
57.50 |
68.60 |
2.43 |
0.7900 |
2019 |
60.90 |
72.02 |
2.77 |
0.8000 |
2020 |
64.13 |
74.48 |
3.19 |
0.8167 |
2021 |
68.33 |
78.60 |
3.48 |
0.8283 |
2022 |
71.19 |
80.84 |
3.67 |
0.8400 |
2023 |
73.15 |
82.83 |
3.76 |
0.8433 |
2024 |
75.16 |
85.17 |
3.85 |
0.8433 |
2025 |
77.17 |
87.53 |
3.93 |
0.8433 |
2026 |
79.01 |
89.66 |
4.02 |
0.8433 |
2027 |
80.60 |
91.49 |
4.10 |
0.8433 |
2028 |
82.20 |
93.31 |
4.19 |
0.8433 |
2029 |
83.83 |
95.15 |
4.28 |
0.8433 |
2030 |
85.52 |
97.09 |
4.37 |
0.8433 |
Thereafter |
+2.0%/yr |
+2.0%/yr |
+2.0%/yr |
0.8433 |
FINDING, DEVELOPMENT AND ACQUISITION COSTS
Journey’s finding and development (“F&D”) and finding, development and acquisition (“FD&A”) costs for 2017, 2016 and the three-year average are presented in the tables below. The capital costs used in the calculations are those costs related to: land acquisition and retention, seismic, drilling, completions, tangible well site, tie-ins, and facilities, plus the change in estimated future development costs (“FDC”) as per the independent evaluator’s reserve report. Net acquisition costs are the cash outlays in respect of acquisitions; minus the proceeds from the disposition of properties during the year. Due to the timing of capital costs and the subjectivity in the estimation of future costs, the aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated FDC’s generally will not necessarily reflect total FDC’s related to reserve additions for that year. The reserves used in this calculation are working interest reserve additions, including technical revisions and changes due to economic factors. The 2017 and the three-year average capital expenditures are unaudited as the 2017 financial results are in the process of being finalized.
Proved Finding, Development & Acquisition Costs |
2017 |
2016 |
3 Year |
|
Capital expenditures (including A&D) ($000’s) |
65,543 |
6,944 |
120,537 |
|
Change in future capital ($000’s) |
20,073 |
12,677 |
15,839 |
|
Total capital for FD&A (000’s) |
85,616 |
19,621 |
136,376 |
|
Reserve additions, including A&D (Mboe) |
10,834 |
4,203 |
17,691 |
|
Proved FD&A costs – including changes in future capital ($/boe) |
7.90 |
4.67 |
7.71 |
|
Proved FD&A costs – excluding changes in future capital ($/boe) |
6.05 |
1.65 |
6.81 |
|
Recycle ratio(1) |
||||
Including changes in future capital |
1.6 |
2.6 |
1.7 |
|
Proved plus Probable Finding, Development & Acquisition Costs |
2017 |
2016 |
3 Year |
|
Capital expenditures (including A&D) ($000’s) |
65,543 |
6,944 |
120,537 |
|
Change in future capital ($000’s) |
41,710 |
(9,967) |
3,911 |
|
Total capital for FD&A (000’s) |
107,253 |
(3,023) |
124,448 |
|
Reserve additions, including A&D (Mboe) |
16,058 |
1,093 |
21,093 |
|
Proved plus Probable FD&A costs – including changes in future |
6.68 |
(2.77) |
5.90 |
|
Proved plus Probable FD&A costs – excluding changes in future |
4.08 |
6.35 |
5.71 |
|
Recycle ratio (1) |
||||
Including changes in future capital |
1.9 |
(4.4) |
2.2 |
|
Proved Finding & Development Costs |
2017 |
2016 |
3 Year |
|
Capital expenditures (excluding A&D) ($000’s)(2) |
30,406 |
15,496 |
88,539 |
|
Change in future capital ($000’s)(2) |
(985) |
18,623 |
(1,136) |
|
Total capital for F&D ($000’s) |
29,421 |
34,119 |
85,403 |
|
Reserve additions, (excluding A&D) (Mboe) |
1,007 |
4,136 |
7,461 |
|
Proved F&D costs – including changes in future capital ($/boe) |
29.22 |
8.25 |
11.45 |
|
Proved F&D costs – excluding changes in future capital ($/boe) |
30.19 |
3.75 |
11.60 |
|
Recycle ratio (1) |
||||
Including changes in future capital |
0.4 |
1.5 |
1.1 |
|
Proved Plus Probable Finding & Development Costs |
2017 |
2016 |
3 Year |
|
Capital expenditures (excluding A&D) ($000’s)(2) |
30,406 |
15,496 |
86,539 |
|
Change in future capital ($000’s)(2) |
(1,860) |
15,804 |
(17,330) |
|
Total capital for F&D ($000’s) |
28,546 |
31,300 |
69,209 |
|
Reserve additions (excluding A&D) (Mboe) |
1,203 |
3,045 |
6,761 |
|
Proved plus Probable F&D costs – including changes in future |
23.73 |
10.28 |
10.24 |
|
Proved plus Probable F&D costs – excluding changes in |
25.28 |
5.09 |
12.80 |
|
Recycle ratio (1) |
||||
Including changes in future capital |
0.5 |
1.2 |
1.2 |
Notes: |
|
(1) |
Recycle ratio is calculated as the operating netback per boe divided by F&D or FD&A costs per boe as applicable. The operating netbacks used in the respective years are as follows: 2017 (unaudited) – $12.56/boe; 2016 – $12.21 and the three year average is $12.73. |
(2) |
Development capital has been adjusted for the effects of reserves categorized as acquisitions and dispositions. |
FUTURE DEVELOPMENT COSTS
The following table provides the breakdown of future development costs deducted in the estimation of the future net revenue attributable to the proved and proved plus probable reserve categories noted below:
Year |
Proved Reserves |
Proved Plus Probable Reserves |
|
2018 |
19,130 |
23,055 |
|
2019 |
29,498 |
63,569 |
|
2020 |
20,710 |
60,041 |
|
2021 |
22,668 |
35,096 |
|
2022 |
7,079 |
12,746 |
|
Remaining |
12,198 |
14,118 |
|
Total (Undiscounted) |
111,283 |
208,625 |
RESERVE LIFE INDEX
The Company’s reserve life index (“RLI”) is calculated by taking the Company Gross Reserves from the GLJ Report and dividing them by the projected 2018 production as estimated in the GLJ report.
Company Gross |
2018 Company |
RLI |
|
Reserves Category |
(Mboe) |
(Mboe) |
(Years) |
Proved, developed, producing |
27,891 |
3,611 |
7.7 |
Total proved |
37,300 |
3,813 |
9.8 |
Proved plus probable producing |
36,851 |
3,706 |
9.9 |
Proved plus probable |
60,179 |
3,979 |
15.1 |
NET ASSET VALUE
The following table provides a calculation of Journey’s estimated net asset value (“NAV”) and net asset value per share (“NAVPS”) as at December 31 based on the estimated future net revenues associated with Journey’s reserves as presented in the GLJ Report. The following numbers were used in the NAV calculation and are pending finalization of the year-end audit: 1) net debt of approximately $103,000 thousand; and 2) funds flow of approximately $9,800, based on production of approximately 10,500 (46% oil and NGL’s) for the fourth quarter.
Net asset value ($000’s) |
||||
Reserves category |
2017(1) |
2017 Pro-forma(2) |
2016(1) |
% |
Proved, developed, producing |
162,549 |
141,213 |
178,857 |
(21) |
Total proved |
218,464 |
197,128 |
249,365 |
(21) |
Proved plus probable producing |
237,143 |
215,807 |
244,158 |
(12) |
Proved plus probable |
437,968 |
416,632 |
456,481 |
(9) |
Net asset value per share ($) |
||||
Reserves category |
2017(4) |
2017 Pro- forma(3) |
2016(4) |
% |
Proved, developed, producing |
3.17 |
3.66 |
4.09 |
(11) |
Total proved |
4.26 |
5.11 |
5.71 |
(11) |
Proved plus probable producing |
4.63 |
5.60 |
5.59 |
– |
Proved plus probable |
8.55 |
10.81 |
10.44 |
4 |
Notes: |
|||
(1) |
Aggregate NAV is calculated by taking the future net revenues per the GLJ report, on a before tax basis, discounted at 10% and adjusting for the following: |
||
a) |
Add undeveloped land value, as per management’s estimate, of $13,823 thousand at December 31, 2017 (December 31, 2016 – $13,721 thousand). |
||
b) |
Subtract net debt at December 31, 2017 of approximately $103,000 thousand (unaudited); (December 31, 2016 – $86,916 thousand). |
||
(2) |
Pro-forma NAV is the year end NAV, adjusted for $21,336 thousand of additional debt incurred by Journey in the 12,700 thousand share buyback which closed on February 2, 2018. |
||
(3) |
Pro-forma NAVPS is calculated by taking the pro-forma NAV and dividing it by the basic shares outstanding after the share buyback, or approximately 38,541 thousand shares. |
||
(4) |
Year-end NAVPS is calculated by taking the NAV and dividing it by the basic shares outstanding as at December 31, 2017 of 51,241 thousand shares (current outstanding of 38,541 thousand; December 31, 2016 – 43,703 thousand). All share counts have been rounded to the nearest 1,000 shares. |
About the Company
Journey is a Canadian exploration and production company focused on oil-weighted operations in western Canada. Journey’s strategy is to grow its production base by drilling on its existing core lands, implementing waterflood projects, and by executing on accretive acquisitions. Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with waterfloods. Journey is also in the early phases of advancing development of an unconventional shale resource play in the oil window of the Duvernay, in the western shale basin of our central core area.