Pine Cliff’s Board of Directors has approved a 2019 capital budget of $10.0 million that will be funded from adjusted funds flow. Pine Cliff intends to spend approximately $1.9 million drilling four (0.4 net) wells in the liquids rich Edson area of Alberta, $1.7 million drilling one (0.6 net) oil well in Central Alberta, $3.9 million on facilities and major maintenance capital and $2.5 million on abandonments and reclamation. Pine Cliff will monitor its capital spending throughout the year and may modify expenditures depending on commodity prices to target spending within adjusted funds flow.
Based on the $3.6 million drilling capital budget, Pine Cliff is budgeting 2019 annual production volumes to range from 18,500 to 19,000 BOE per day, weighted 93% to natural gas. Pine Cliff’s fourth quarter 2018 production was 19,576 BOE per day, weighted 94% to natural gas.
Pine Cliff will continue to consider additional opportunities to enhance its shareholders’ long term value which may include further asset acquisitions or dispositions, although maintaining a strong balance sheet will remain a prime focus.
Reserve Report Highlights
Pine Cliff’s independent reserve report was prepared by McDaniel & Associates Limited (“McDaniel”) in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) with the effective date of December 31, 2018.
As a result of the low natural gas prices experienced in 2018, Pine Cliff conducted a limited capital program of $13.4 million (excluding acquisitions and dispositions but including $3.9 million of major maintenance and other capital expenses and $2.7 million in abandonment expenditures). Spending included nine gross (2.0 net) drills and seven gross (6.3 net) recompletions.
Highlights of the McDaniel reserve report include:
- Positive technical revisions of 7.1 MMBOE on a proved basis and 6.1 MMBOE on a proved plus probable basis in Pine Cliff properties due to continued strong performance of base production;
- Prior to adjusting for 2018 production, total positive net changes to proved reserves were 4.4 MMBOE (9%), largely a result of improved well performance and a successful well recompletion program;
- Remaining proved reserves of 48.3 MMBOE (92% natural gas) at December 31, 2018, decreased by 2.8 MMBOE (5%) from 51.1 MMBOE (95% natural gas) at December 31, 2017;
- Prior to adjusting for 2018 production, total positive net changes to proved plus probable reserves were 1.6 MMBOE, largely a result of improved well performance;
- Remaining proved plus probable reserves of 61.6 MMBOE (92% natural gas) at December 31, 2018 decreased by 5.6 MMBOE (8%) from 67.2 MMBOE (94% natural gas) at December 31, 2017;
- Approximately 78% of total reserves are classified as proved reserves and approximately 22% are classified as probable reserves;
- Approximately 97% of proved reserves are classified as proved developed producing;
- Net present value for proved plus probable reserves of $150.8 million, discounted at 10%, a decrease of $89.3 million, or 37%, from December 31, 2017, mainly as a result of decreases in the future natural gas price deck; and
- In line with Pine Cliff’s historical focus on acquisitions rather than drilling existing reserves, the McDaniel reserve report reflects a conservative future development capital program of $68.3 million over the next five years.
Pine Cliff’s Reserves
McDaniel has used a three consultant average price (McDaniel, GLJ & Sproule) forecast, resulting in a price forecast of $1.88 and $2.31 per Mcf for AECO natural gas and US$58.58 and US$64.60 per Bbl for WTI oil in 2019 and 2020 respectively.
Summary of Remaining Working Interest Reserves, as of December 31, 2018
|Light, Medium and Heavy Oil||Natural Gas and CBM||Natural Gas Liquids||BOE|
|Total Proved plus Probable||1,084.7||338,519.2||4,074.7||61,579.2|
Summary of Net Present Values of Future Net Revenue, Before Income Taxes, as of December 31, 2018
|Discounted at (% per year)|
|Total Proved plus Probable||181.0||171.0||150.8||131.1|
Reconciliation of Gross Reserves by Principal Product Type, as of December 31, 2018
|Light, Medium, and Heavy Oil and Natural Gas Liquids||Natural Gas and Coal Bed Methane||BOE|
|Proved||Proved plus Probable||Proved||Proved plus Probable||Proved||Proved plus Probable|
|December 31, 2017||3,054.8||4,312.9||288,108.5||377,431.5||51,072.9||67,218.2|
|Change in Working Interest||(56.9||)||(112.4||)||(599.8||)||(1,435.5||)||(156.9||)||(351.7||)|
|December 31, 2018||3,820.8||5,159.4||266,732.1||338,519.2||48,276.1||61,579.2|
About Pine Cliff
Pine Cliff is a natural gas company with a long-term view of creating shareholder value. Pine Cliff’s current focus is on acquiring, developing and operating long life assets that are cash flow positive in a low commodity price environment. Further information relating to Pine Cliff may be found on www.sedar.com as well as on Pine Cliff’s website at www.pinecliffenergy.com.