CALGARY, Alberta, June 12, 2018 (GLOBE NEWSWIRE) — (TSX-V:BBI) Blackbird Energy Inc. (“Blackbird” or the “Company”) is pleased to announce the results of an updated independent resource evaluation (“2018 Resource Evaluation”) by McDaniel & Associates Consultants Ltd. (“McDaniel”) in respect of the Company’s Pipestone/Elmworth Montney lands. McDaniel prepared the evaluation in accordance with the standards set out in National Instrument 51-101 of the Canadian Securities Administrators and the Canadian Oil and Gas Evaluation Handbook.
“Blackbird’s updated contingent resource evaluation is a critical step in our planning for future development. The report supports Blackbird’s significant undeveloped value and resource inventory beyond our existing reserves base for future growth and provides management with confidence to enter into discussions for expanded future processing capacity.” said Garth Braun, President, CEO and Chairman of Blackbird.
McDaniel previously conducted an independent resource evaluation of Blackbird’s Pipestone/Elmworth Montney lands in 2017 (the “2017 Resource Evaluation”). The 2018 Resource Evaluation is effective as of May 1, 2018, and is based on McDaniel’s forecast commodity pricing at April 1, 2018. The 2017 Resource Evaluation report was effective March 1, 2017 and based on McDaniel’s forecast commodity pricing at January 1, 2017. The results of the 2018 Resource Evaluation are summarized in the discussion and tables that follow.
These contingent resources are in addition to the Company’s proved plus probable reserves evaluated by McDaniel effective July 31, 2017, as previously disclosed by Blackbird.
Estimates of net present value (NPV) of future net revenue attributed to the contingent resources, whether or not risked, do not represent their fair market value. Certain contingencies currently prevent the classification of these contingent resources as reserves. Information on these contingencies is provided in the footnotes to the tables below. There is no certainty that it will be commercially viable to produce any portion of the contingent resources.
- Total Best Estimate Net Contingent Resources of 112.2 MMboe: The 2018 Resource Evaluation reports Best Estimate Development Pending Contingent Resources of 112.2 MMboe (43% liquids) as of May 1, 2018. This represents an 149% increase from the Best Estimate Development Pending Contingent Resources of 45.0 MMboe from the 2017 Resource Evaluation.
- Risked Before Tax NPV10 of $587.3 Million: The corresponding estimate of risked before tax NPV of future net revenue for Best Estimate Development Pending Contingent Resources, using a discount rate of 10% per year, is $587.3 million CAD. This represents an 35% increase from the risked before tax NPV, discounted at 10% per year, of $436.5 million CAD from the 2017 Resource Evaluation.
- Contingent Resources Booked on 33.4 of 113.5 Net Sections: Per Figure 1 below, Blackbird has now booked 33.4 of its 113.5 net sections on a contingent resource basis, representing 29.4% of Blackbird’s Pipestone/Elmworth Montney acreage. Contingent resources have been booked in two of four prospective Montney intervals.
Contingent Resources Summary
The following table sets forth the estimated volumes (by product type) of Best Estimate Development Pending Contingent Resources as of May 1, 2018, as evaluated by McDaniel in the 2018 Resource Evaluation, together with corresponding estimates of before tax NPV of future net revenue, on an unrisked basis and also risked for an estimated 80% chance of development.
An estimate of risked NPV of future net revenue of contingent resources is preliminary in nature and is provided to assist the reader in reaching an opinion on the merit and likelihood of Blackbird proceeding with the required investment. It includes contingent resources that are considered too uncertain with respect to the chance of development to be classified as reserves. There is uncertainty that the risked NPV of future net revenue will be realized.
|Best Estimate Development Pending
|Crude Oil (Mbbl)||80||%||2,834||2,267|
|Natural Gas (MMcf)||80||%||478,356||382,685|
|Natural Gas Liquids (Mbbl)(8)||80||%||12,165||9,732|
|NPV Before Tax ($ million), discounted at|
|(1)||Net (after royalties) using forecast prices and costs, including McDaniel’s commodity price forecasts at April 1, 2018. Net contingent resources are working interest (operating or non-operating) share after deduction of royalty obligations, plus royalty interests in contingent resources. All of the Company’s properties to which contingent resources are booked are located in Alberta.|
|(2)||Contingent Resources are defined in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. It is also appropriate to classify as Contingent Resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage.|
|(3)||Pursuant to the COGE Handbook, there are three classification levels of Contingent Resource estimates: Low Estimate, Best Estimate and High Estimate. Best estimate is considered to be the best estimate of the quantity that will be actually recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the best estimate. All numbers in the table above are “Best Estimate”.|
|(4)||Pursuant to the COGE Handbook, Contingent Resources are sub-classified based on project maturity. All Contingent Resources indicated in the 2018 Resource Evaluation have been sub-classified as “Development Pending”, which applies in circumstances where resolution of the final conditions for development is being actively pursued and indicates a relatively high chance of development versus the other sub-classifications.|
|(5)||All Contingent Resources have been risked for chance of development. For Contingent Resources, the chance of development is the estimated probability of a project being commercially viable, and development proceeding in a timely fashion. Determining chance of development requires consideration of each applicable contingency and quantifying them so as to arrive at an overall development risk factor. In quantifying the chance of development for purposes of the 2018 Resource Evaluation, factors that were assessed quantitatively to be less than one in the development risk calculation included the economic status, the project evaluation scenario status, and the development time frame. The chance of development multiplied by the unrisked resource volume estimate yields the risked resource volume estimate. As many of these factors have a wide range of uncertainty and are difficult to quantify, the chance of development is an uncertain value that should be used with caution.|
|(6)||Continuous development through multi-year exploration and development programs and significant levels of future capital expenditures are required in order for additional resources to be recovered in the future. The principal risks that would inhibit the recovery of additional reserves relate to the potential for variations in the quality of the Montney formation where minimal well data currently exists, access to the capital required to develop the resources, low commodity prices that would curtail the economics of development and the future performance of wells, regulatory approvals, access to required services at an appropriate cost, and the effectiveness of well fracturing technology and applications. For Contingent Resources to be converted to reserves, Blackbird must ascertain commercial production rates, then develop firm plans, including with respect to timing, infrastructure and the commitment of capital. Confirmation of commercial productivity is generally required before the Company can prepare firm development plans and commit required capital for the development of the Contingent Resources. Additional contingencies relate to the current lack of infrastructure required to develop the resources in a relatively quick time frame. As continued delineation occurs, some resources currently classified as Contingent Resources are expected to be re-classified to reserves.|
|(7)||There is uncertainty that it will be commercially viable to produce any portion of these resources.|
|(8)||Natural Gas Liquids do not include Condensate.|
|(9)||Barrels of Oil Equivalent (BOE) based on a ratio of 6:1 for Natural Gas, 1:1 for Condensate and C5+, 1:1 for Ethane, 1:1 for Propane, and 1:1 for Butanes. BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.|
The estimated cost reflected in the 2018 Resource Evaluation to bring on commercial production from the Best Estimate Development Pending Contingent Resources for all four product types is approximately $1,833 million (when discounted at 10%, the estimated cost is approximately $668 million). The expected timeline to bring these resources on production is between the years 2021 and 2042. Best Estimate Development Pending Contingent Resources are expected to be recovered using the same technology of horizontal drilling and multi-stage fracturing that Blackbird has already proven to be effective in its Pipestone/Elmworth Montney play.
Blackbird anticipates announcing updated reserves data as at July 31, 2018, along with financial and operational results for the year then ended, before the end of November, 2018.
Blackbird Energy Inc. is a highly innovative oil and gas exploration and development company focused on the condensate and liquids-rich Montney fairway at Pipestone/Elmworth, near Grande Prairie, Alberta.