CALGARY, Alberta, Aug. 09, 2018 (GLOBE NEWSWIRE) — NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX: NVA) is pleased to announce that it has entered into an agreement to acquire Cenovus Pipestone Partnership which holds assets in the Pipestone area of Northwest Alberta (the “Acquired Business”) for $625 million (the “Acquisition”) before closing adjustments. The assets of the Acquired Business are situated primarily in the premium core of the condensate-rich Alberta Triassic Montney fairway and on 35,250 net acres of land featuring four layers of Montney development. The assets of the Acquired Business represent a 29% increase to NuVista’s current Montney land position. The Acquired Business includes 9,600 Boe/d of production and significant infrastructure. The Acquisition will be funded with NuVista’s expanded credit facilities, a $214 million private placement (the “Private Placement”) of subscription receipts (the “Subscription Receipts”) and a concurrent $170 million prospectus offering (the “Prospectus Offering” and together with the Private Placement, the “Financings”) of Subscription Receipts. A syndicate of underwriters led by CIBC Capital Markets, Peters & Co. Limited and RBC Capital Markets (collectively, the “Underwriters”) have agreed to purchase the Financings, which will be offered at a price of $8.10 per Subscription Receipt for gross proceeds of $384 million. Additionally, NuVista will raise by way of a private placement, up to approximately $35 million in common shares (“Common Shares”) on a “flow-through” basis in respect of Canadian Development Expenses (“CDE”) pursuant to the Income Tax Act (Canada) at a price of $9.05 per Common Share (the “Flow Through Offering”).
• High-quality, condensate-rich Montney position in the over-pressured Pipestone area including:
- 35,250 net acres of land, the majority of which is a single contiguous block with four layers of well-delineated development potential;
- 157 MMBoe gross Proved plus Probable (“P+PA”) reserves(1) with $1.21 billion Net Present Value before Tax discounted at 10 percent (“NPVBT10”)(1) booked predominately in only one zone thus far;
- Full-field development production targeting over 50,000 Boe/d, generating over $400 million of targeted annual adjusted funds flow(2,3) and almost $200 million of targeted free adjusted funds flow(2,3); and
- Current production of 9,600 Boe/d (83% Montney) with a low decline rate estimated to be 22% and associated infrastructure.
• NuVista’s full-field development production line of sight increased from 60,000 Boe/d to over 110,000 Boe/d, with higher condensate weighting and enhanced free adjusted funds flow per barrel;
• Strongly accretive on every key financial and operational metric, on an unadjusted and debt-adjusted basis, over the medium and long term. The Acquisition is approximately 30% accretive to P+PA Net Asset Value before Tax discounted at 10 percent (“NAVBT10”)(1,4) per share and, once material incremental volumes from the Acquired Business are brought on-stream, over 30% accretive to adjusted funds flow per share(2,3) by 2020-2021;
• Upon closing, NuVista’s credit facility is expected to be increased to approximately $450 million from $310 million; and
• Exposure to an additional 52,800 net acres of non-Montney land with access to existing infrastructure.
This is a rare and compelling acquisition for NuVista. It adds significantly to our core of the top condensate-rich lands in the Pipestone area which are de-risked to a high degree, with economics that rank in the best echelon of our development opportunities. Recent evidence of Lower Montney success on this block further leverages our existing Lower Montney knowledge for early mover advantage. Based on NuVista’s development plans, the Acquisition increases our line of sight for future full-field development production to over 110,000 Boe/d, with an increased condensate gas ratio (“CGR”) that will result in enhanced margins and free adjusted funds flow generation. NuVista expects sufficient inventory to sustain or grow production from this level for more than a decade. The Acquired Business also generate significant free adjusted funds flow(2) currently, which will be used to accelerate activity on our existing lands. The Acquisition adds materially to the best of our portfolio, enhances our long term prospects, and is significantly accretive to all key operational and financial measures over the near and long term. NuVista is maintaining its financial discipline through the Acquisition, with 2018 year end net debt to adjusted funds flow(2) targeted to be approximately 1.6x, a level we expect to maintain and improve over time. We believe the Acquisition will deliver significant growth and free adjusted funds flow(2), and drive substantial value creation for NuVista shareholders over the short and especially the long term.
|(1)||Reserves information for the Acquired Business is based upon GLJ Petroleum Consultants Ltd.’s’ (“GLJ”) reserve report effective June 30, 2018 at GLJ’s July 1, 2018 price forecast (the “Acquisition Report”). Reserves information for NuVista is based upon GLJ’s reserve report effective December 31, 2017 at GLJ’s January 1, 2018 price forecast the (“NuVista Report”).|
|(2)||See “Non-GAAP Financial and Capital Management Measures”.|
|(3)||Pricing assumption for the full field development target: $US 65/Bbl WTI, $US 3.00/MMBtu NYMEX, $C 1.90/GJ AECO, CAD:USD 1.25 FX.|
|(4)||See “Advisory Regarding Oil and Gas Information”.|
High Quality Assets
The Acquired Business includes 35,250 net acres (86% working interest) in the core of the premium condensate-rich Pipestone Montney fairway in close proximity to NuVista’s existing Pipestone assets. A 200 metre-thick Montney interval underlies the lands, with locations proven in four layers through significant delineation by the previous operator and offsetting operators. The lands exhibit a rare combination of high reservoir quality and rich to very-rich condensate yields, all in an over-pressured regime. GLJ has assigned 157 MMBoe of P+PA reserves effective June 30, 2018, to the Acquired Business across 89 (gross) Montney locations primarily in the C layer only plus 187 (gross) developed Montney and non-Montney wells with an NPVBT10 of $1.21 billion. The condensate weighting of the acquired P+PA reserves assigned by GLJ is approximately 20% (equivalent to approximately 23% condensate if volumes were not being processed in a deep cut plant with higher ethane/propane recoveries and overall Boes). We see significant upside into the range of 35+% condensate ratio for development volumes as drilling moves further northeast and into the other layers which have recently been tested at higher CGR’s.
To view the map associated with this release please visit http://www.globenewswire.com/NewsRoom/AttachmentNg/e948d5f5-edf1-4942-92aa-743e75673e5c
In addition to the 8,000 Boe/d of Montney production, the Acquired Business also includes 1,600 Boe/d of production from various zones on 52,800 net acres of non-Montney land. These assets are located to the northeast of the Pipestone Montney acreage and consist largely of non-operated, low decline unit production with below industry average asset retirement obligations. Also included is a 39% operated working interest in the area gathering and compression system and the Wembley Gas Plant.
Step Change in Full-Field Development Production Expectation
The Acquisition further enhances NuVista’s ability to deliver industry-leading profitable growth and returns. When they reach full field development, we target the Acquired Business to add over 50,000 Boe/d of production to NuVista. When combined with NuVista’s existing assets, future full-field development production is targeted to increase to over 110,000 Boe/d. The condensate weighting of full-field development production also increases from approximately 30% to 32+%. At the expanded full-field development production level, NuVista is targeting to generate approximately $850 million of adjusted funds flow(1,2) and $325 million of free adjusted funds flow(1,2). The pace to reach full-field development production levels will be adjusted as needed over time to ensure balance sheet strength remains as always a priority.
|(1)||See “Non-GAAP Financial and Capital Management Measures”.|
|(2)||Pricing assumption for full field development target: $US 65/Bbl WTI; $US 3.00/MMBtu NYMEX; $C 1.90/GJ AECO; CAD:USD 1.25 FX.|
Positive Pro-Forma Impact
The Acquisition has a significant positive impact on NuVista. It increases P+PA reserves by 45%, and increases P+PA NPVBT10(1,3) by 68%. It also increases NuVista’s P+PA drilling locations by 33%, with locations that rank among the best in NuVista’s portfolio. It is important to note that although inventory has been booked predominately in a single zone, NuVista sees full-field development encompassing a total of four Montney horizons based on demonstrated production on all layers thus far. The asset is expected to produce at approximately 35+% condensate once development ramps up, which is highly valuable and accretive to NuVista’s current outlook.
The Acquisition is also accretive on all medium and long term key financial and operational measures. It is approximately 30% accretive to P+PA NAVBT10(1,2) per share and, once material incremental volumes from the Acquired Business are brought on-stream starting in 2020-2021, the Acquisition is approximately 30% accretive to adjusted funds flow per share. It is also approximately 9% accretive to 2020E adjusted funds flow per share at the midpoint of our outlook ranges, and approximately neutral to 2019E adjusted funds flow per share versus consensus(3), as NuVista is able to accelerate production on its existing lands with the free adjusted funds flow from the Acquired Business, while arranging long term egress for incremental production from the Acquired Business. As such, we have conservatively assumed that new development production from the Acquired Business only begins to meaningfully contribute to corporate volumes in late 2020 or 2021 despite the possibility of commencing in 2019.
Conservative Financial Strategy
Upon completion of the Acquisition, NuVista will maintain its strong financial position. Net debt to adjusted funds flow immediately following the Acquisition is expected to be approximately 1.8x. NuVista expects to maintain and improve its conservative leverage levels over time. Upon closing of the Acquisition, NuVista expects to have drawn approximately $240 million on its anticipated expanded credit facility of approximately $450 million.
Summary of the Transaction
|Purchase Price||$625 million|
|Current Production||9,600 Boe/d|
|Oil & Condensate Proportion||23||%|
|Oil, Condensate & NGLs Proportion||46||%|
|Pipestone Montney||35,250 net acres|
|Other Triassic||52,800 net acres|
|P+PA NPVBT10||$1,212 million|
|PDP Reserves||22 MMBoe|
|Proved Reserves||91 MMBoe|
|P+PA Reserves||157 MMBoe|
|Total PDP Locations
% increase to NuVista PDP location count
|Total P+PA Locations
% increase to NuVista P+PA location count
|(1)||Reserves information per the Acquisition Report.|
|(2)||See “Advisory Regarding Oil and Gas Information”.|
|(3)||“Consensus” is based on information in respect of NuVista compiled by Factset Research Systems Inc. dated July 13, 2018 with adjusted funds flow per share estimates of $1.49 for 2018 and $1.71 for 2019. See “Non-GAAP Financial and Capital Management Measures”.|
The abandonment and reclamation obligations of the Acquired Business have a favorable LLR rating of approximately 5.0 which is similar to NuVista’s favorable rating of 6.4.
Increased 2018 Guidance and Preliminary 2019 and 2020 Outlook
Our revised 2018 guidance and preliminary 2019-2020 outlook is set out below. 2018 guidance reflects the inclusion of the Acquired Business effective July 1. In the fourth quarter of 2018, we anticipate spending an additional $35 million to accelerate completions on 5 wells at Bilbo and commence drilling on 4 wells at Elmworth. With the start-up of the SemCAMS Wapiti gas plant in the first half of 2019, we expect to have access to an additional 10,000 Boe/d of capacity.
For the high end of the range of 2019 and 2020 outlook, we have assumed that our planned Pipestone compressor station is accelerated to start up in the fourth quarter of 2019. This is expected to occur if we achieve historically typical regulatory approval timing, and with the required compressor station/water handling capital spending of approximately $100 million underpinned by the free adjusted funds flow from the Acquired Business. For this case we have also assumed that growth above base production from the Acquired Business commences in the fourth quarter of 2020, driven by favorable timing of access to NGTL and other egress. In this event, infrastructure spending by the Acquired Business commences in 2019.
For the low end of the range of 2019 and 2020 outlook, we have conservatively assumed that our planned Pipestone compressor station does not start up until the first half of 2020. We have also conservatively assumed for the low case that due to NGTL and other egress timing constraints, growth above base production from the Acquired Business does not commence until 2021 and growth spending there does not commence until 2020.
In all years, we expect the Acquired Business base production to deliver approximately 9,000 Boe/d and generate approximately $60 million of adjusted funds flow(2) and $50 million of free adjusted funds flow(2) based on $10 million of annual capital expenditures to maintain base production.
|Average Production (MBoe/d)||36 – 38||40 – 43|
|Capital Investment ($ million)||$270 – $310||$325 – $350|
|Adjusted Funds Flow(1, 2) ($ million)||$240 – $260||$270 – $290|
|Shares Outstanding(3) (million)||175||226||29||%|
|P+PA Reserves(4) (MMBoe)||347||504||45||%|
|P+PA NPV10%(4) ($ million)||$1,782||$||2,994||68||%|
|P+PA NAV10% Per Share(5)||$8.66||$||11.06||28||%|
|P+PA Drilling Locations||272||361||33||%|
2019 Outlook (6)
2020 Outlook (6)
|Average Production (MBoe/d)||53 – 59||62 – 72|
|Per million shares||235 – 265||275 – 320|
|Capital Investment ($ million)||$450 – $500||$575 – $725|
|Adjusted Funds Flow(2,6) ($ million)||$350 – $400||$420 – $510|
|Adjusted Funds Flow Per Share(2,6)||$1.55 – $1.77||$1.86 – $2.26|
|Shares Outstanding(3) (million)||226||226|
|Targeted Net Debt/Adjusted Funds Flow||~1.5||x||~1.5||x|
|Condensate & NGLs Proportion||39||%||39||%|
|(1)||Pricing assumption for 2018: $US 67/Bbl WTI; $US 2.90/MMBtu NYMEX; AECO $C 1.35/GJ; CAD:USD 1.29:1 FX.|
|(2)||See “Non-GAAP Financial and Capital Management measures”.|
|(3)||Assumes 226 million Common Shares outstanding.|
|(4)||Reserve information for the Acquired Business per the Acquisition Report. Reserve information for NuVista per the NuVista Report.|
|(5)||See “Advisory Regarding Oil and Gas Information”.|
|(6)||Pricing assumption for 2019 & 2020: $US 65/Bbl WTI; $US 2.85/MMBtu NYMEX; $C 1.75/GJ AECO; CAD:USD 1.31 FX.|
Although initial gas volumes from the Acquired Business will be exposed to AECO pricing, the increased condensate percentage more than makes up for the reduced gas pricing as compared to NuVista’s preexisting gas sales which are largely tied to NYMEX pricing. In the near term, we expect approximately 40% of total corporate gas sales to be exposed to AECO pricing. As such, approximately 70% of corporate revenues are expected to come from condensate sales, 7% of revenues from NGL sales, and approximately 23% of revenues from natural gas sales. We will look to diversify markets for natural gas production from the Acquired Business over time.
Growth Plan to 110,000 Boe/d
NuVista’s pro-forma condensate-rich Montney development inventory provides clear line-of-sight to growth to over 110,000 Boe/d. This represents over an 80% increase from our previous five-year plan of 60,000 Boe/d with increased margin through production with superior condensate yields, and with accretive per-share metrics. For the Acquired Business, we currently target to execute an annual program of approximately 20 wells during ramp-up, and with approximately 12 wells per year required thereafter to sustain production.
Targeted Full Field
|Future Full-Field Development Capacity||60,000 Boe/d||110,000 Boe/d||83||%|
|Annual Adjusted Funds Flow(1,2)||$430 million||$850 million||98||%|
|Sustaining Capital(2)||$280 million||$525 million||88||%|
|Free Adjusted Funds Flow(1,2)||$150 million||$325 million||117||%|
|Free Adjusted Funds Flow Per Share(1,2,3)||$0.86||$1.44||68||%|
|Condensate & NGLs Proportion||38%||40+%||5+||%|
|(1)||Pricing assumption for full field development target: $US 65/Bbl WTI, $US 3.00/MMBtu NYMEX, $C 1.90/GJ AECO, CAD:USD 1.25 FX.|
|(2)||See “Non-GAAP Financial and Capital Management Measures”.|
|(3)||NuVista “Current Targeted Full Field Development” assumes 175 million Common Shares outstanding and Pro-Forma Targeted Full Field Development assumes 226 million Common Shares outstanding.|
NuVista has top quality assets and every team member is focused upon relentless improvement. We are excited to extend our growth plan to 110,000 Boe/d while adding greater value per share. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their continued guidance and support.
The following tables highlight the reserves of the Acquired Business per the Acquisition Report:
Summary of Reserves
SUMMARY OF OIL AND NATURAL GAS RESERVES
as of June 30, 2018
FORECAST PRICES AND COSTS
|LIGHT AND MEDIUM
|TOTAL PROVED PLUS PROBABLE||1,325||1,094||21,784||19,956||67,179||55,070||508,515||470,286|
|NET PRESENT VALUE OF FUTURE NET REVENUE
BEFORE INCOME TAXES DISCOUNTED (%/year)
FORECAST PRICES AND COSTS
|TOTAL PROVED PLUS PROBABLE||3,468,567||1,891,100||1,211,728||854,364||639,529|
The forecast cost and price assumptions above assume increases in wellhead selling prices and take into account inflation with respect to future operating and capital costs. The following crude oil and natural gas benchmark reference pricing, inflation and exchange rates were utilized in the Acquisition Report.
SUMMARY OF PRICING AND INFLATION RATE ASSUMPTIONS
AS OF July 1, 2018
FORECAST PRICES AND COSTS
||NATURAL GAS||NATURAL GAS LIQUIDS||INFLATION
|WTI Cushing Oklahoma
|Edmonton Par Price 40o API($Cdn/Bbl)||Hardisty Heavy
(1) Inflation rates for forecasting prices and costs.
(2) Exchange rates used to generate the benchmark reference prices in this table.
Future Development Costs
The following table sets forth development costs deducted in the estimation of the future net revenue attributable to the reserve categories noted above for the Acquired Business.
|FORECAST PRICES AND COSTS|
|Proved Plus Probable Reserves
|Total (Discounted at 10%)||408,127||513,794|
We expect to fund the development costs of these reserves through a combination of internally generated cash, equity issuances and debt. There can be no guarantee that funds will be available or that our Board of Directors will allocate funding to develop all of the reserves attributed to the Acquired Business in the Acquisition Report. Failure to develop those reserves could have a negative impact on the future net revenue.
The interest or other costs of external funding are not included in the reserves and future net revenue estimates set forth above and would reduce reserves and future net revenue to some degree depending upon the funding sources utilized. We do not anticipate that interest or other funding costs would make development of any assets of the Acquired Business uneconomic.
In connection and concurrent with the Acquisition, NuVista has entered into an agreement with the Underwriters whereby the Underwriters have agreed to buy, on a bought deal basis, from NuVista 47,415,801 Subscription Receipts at a price of $8.10 per Subscription Receipt, consisting of 20,990,000 Subscription Receipts pursuant to the Prospectus Offering and 26,425,801 Subscription Receipts pursuant to the Private Placement to certain institutional investors. Additionally, NuVista will issue up to approximately 3,867,000 CDE “Flow through” Common Shares at a price of $9.05 per Common Share for gross proceeds of up to approximately $35 million pursuant to the Flow Through Offering. CIBC Capital Markets, Peters & Co. Limited and RBC Capital Markets are acting as joint bookrunners on the Financings. Members of NuVista’s Board of Directors and management team intend to participate in the Prospectus Offering and/or the Flow Through Offering.
The Company has also granted the Underwriters of the Prospectus Offering an over-allotment option to purchase up to an additional 2,099,000 Subscription Receipts (or, in certain circumstances, Common Shares), on the same terms, exercisable in whole or in part at any time for a period of up to 30 days following closing of the Financings, to cover over-allotments, if any. If the over-allotment option is exercised in full, gross proceeds from the Financings will be approximately $400 million.
The gross proceeds from the Financings will be held in escrow pending the completion of the Acquisition. If all outstanding conditions to the completion of the Acquisition (other than funding) are met and all necessary approvals for the Prospectus Offering, Private Placement and the Acquisition have been obtained on or before November 15, 2018, the net proceeds from the sale of the Subscription Receipts will be released from escrow to NuVista and each Subscription Receipt will be exchanged for one Common Share for no additional consideration and without any action on the part of the holder. If the Acquisition is not completed at or before 5:00 p.m. (Calgary time) on November 15, 2018, then the purchase price for the Subscription Receipts will be returned pro rata to subscribers, together with a pro rata portion of interest earned on the escrowed funds.
The Subscription Receipts issued pursuant to the Prospectus Offering will be distributed by way of a short form prospectus in all provinces of Canada. Completion of the Acquisition and the Financings are subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the TSX. Closing of the Financings and the Flow-Through Offering is expected to occur on August 30, 2018 and the Acquisition is expected to close in September 2018. Completion of the concurrent Private Placement is subject to a number of conditions including the closing of the Prospectus Offering. Completion of the Prospectus Offering is conditional upon the closing of the concurrent Private Placement. Completion of the Flow-Through Offering is not conditional upon the closing of the Acquisition or the Financings.
In connection with the Flow-Through Offering, NuVista will incur eligible CDE (the “Qualifying Expenditures”), after the closing date and prior to December 31, 2018 in the aggregate amount of not less than the total amount of the gross proceeds raised from the Flow-Through Offering and NuVista will renounce the Qualifying Expenditures so incurred to the purchasers of the effective on or prior to December 31, 2018.
CIBC Capital Markets is acting as exclusive financial advisor to NuVista with respect to the Acquisition. Burnet, Duckworth & Palmer LLP is acting as NuVista’s legal advisor.
NuVista will host a pre-recorded conference call to discuss the Acquisition today. The details of the conference call are below.
An updated presentation on the Acquisition is available on NuVista’s website at www.nuvistaenergy.com.
|Pre-Recorded Conference Call|
|To listen to the conference call, please dial (toll-free Canada/US): 1-800-408-3053 and enter passcode 6503338#.
The replay is available through August 23, 2018.
Basis of Presentation
Unless otherwise noted, the financial data presented in this press release has been prepared in accordance with Canadian generally accepted accounting principles (“GAAP“) also known as International Financial Reporting Standards (“IFRS“). The reporting and measurement currency is the Canadian dollar.
Advisory Regarding Oil and Gas Information
The terms Boe (barrels of oil equivalent), MBoe (thousands of barrels of oil equivalent), MMBOE (millions of barrels of oil equivalent) and MMcf (millions of cubic feet of gas equivalent) are used throughout this press release. Such terms may be misleading, particularly if used in isolation. The conversion ratio of six thousand cubic feet per barrel (6 Mcf:1 Bbl) of natural gas to barrels of oil equivalent and the conversion ratio of 1 barrel per six thousand cubic feet (1 Bbl:6 Mcf) of barrels of oil to natural gas equivalent is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
In this press release, NuVista has used a number of oil and gas metrics commonly used in the oil and natural gas industry which do not have standardized meanings and therefore may be calculated differently from the metrics presented by other oil and gas companies. Management uses this oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare our operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this press release, should not be relied upon for investment or other purposes. Such metrics include “NAVBT10”, and “sustaining capital”. NPV10BT represents NPV10 before tax where NPV10 represents the anticipated net present value of the future net revenue discounted at a rate of 10% associated with the type curves presented. NAVBT10 represents net asset value before tax and has been calculated as NPV10BT less net debt as at June 30, 2018 of $268 million ($492 million in the pro forma case) divided by the 175 million Common Shares (226 million in the pro forma case). Sustaining capital is an estimate by management of NuVista of the amount of capital required to be spent in a given year to maintain production flat.
This press release discloses drilling locations in two categories: (i) proved developed producing drilling locations; and (ii) P+PA locations. Both categories of drilling locations are derived from (i) in respect of NuVista’s current asset base, the NuVista Report, and (ii) in respect of the Acquired Business, the Acquisition Report. The proved developed producing drilling locations are those locations that have associated proved reserves and the P+PA drilling locations are those that have associated proved and/or probable reserves, as applicable. There is no certainty that NuVista will drill all drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas production. The drilling locations on which NuVista actually drill wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors.
Certain information in this press release may constitute “analogous information” as defined in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) with respect to the certain drilling results, or offset well production from other producers with operations that are in geographical proximity to or believed to be on-trend with NuVista’s Montney assets. Management of NuVista believes the information may be relevant to help determine the expected results that NuVista may achieve within NuVista’s lands and such information has been presented to help demonstrate the basis for NuVista’s business plans and strategies with respect to its Montney assets. There is no certainty that the results of the analogous information or inferred thereby will be achieved by NuVista and such information should not be construed as an estimate of future production levels, reserves or the actual characteristics and quality of NuVista’s Montney assets.
It should not be assumed that the future net revenues included in this press release represents the fair market value of the reserves.
The reserves estimates prepared herein with respect to NuVista’s current assets have been evaluated by GLJ in accordance with NI 51-101 and the COGE Handbook, are effective December 31, 2017 and are based on an independent evaluation by GLJ using January 1, 2018 forecast pricing. The reserves estimates prepared herein with respect to the Acquired Business have been evaluated by GLJ in accordance with NI 51-101 and the COGE Handbook, are effective June 30, 2018 and are based on an independent evaluation by GLJ using July 1, 2018 forecast pricing. The reserves presented herein have been categorized accordance with the reserves and resource definitions as set out in the COGE Handbook. The estimates of reserves and future net revenue for individual properties in this press release may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
Reserves are estimated remaining quantities of petroleum anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are further classified according to the level of certainty associated with the estimates and may be sub-classified based on development and production status. Proved Reserves are those quantities of petroleum, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations. Probable Reserves are those additional quantities of petroleum that are less certain to be recovered than Proved Reserves, but which, together with Proved Reserves, are as likely as not to be recovered.
The pro forma reserves information in this press release are derived (i) in respect of NuVista’s reserves as at December 31, 2017 from the NuVista Report; and (ii) in respect of the reserves associated with the Acquired Business as at June 30, 2018 from the Acquisition Report. Since these reserves were estimated as at different dates, they have been generated based on different assumptions in respect of commodity pricing among other metrics. As a result, the presentation of the reserves on a consolidated pro forma basis for the Acquisition would not reflect the actual combined estimate of NuVista’s reserves and those of the Acquired Business at December 31, 2017 and should not necessarily be viewed as predictive of NuVista’s reserves and future production.