CALGARY, Alberta, Feb. 22, 2019 (GLOBE NEWSWIRE) — Razor Energy Corp. (“Razor” or the “Company”) (TSXV: RZE) is pleased to provide a summary of its 2018 year-end reserves evaluation.
The highlights and reserves summary below set forth Razor’s gross reserves as at December 31, 2018, as evaluated by Sproule Associates Limited (“Sproule”) in an independent report dated February 19, 2019 (the “Sproule Report”). The figures in the following tables have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) and the reserve definitions contained in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Additional reserve information as required under NI 51-101 will be included in the Company’s annual information form which will be filed on SEDAR on or before March 31, 2019.
Razor’s 2018 annual audited consolidated financial statements have not been completed. Certain financial and operating information included in this news release are based on management’s estimates only and are subject to audit and may be subject to change upon completion of the Company’s annual audited consolidated financial statements. See “Reader Advisories – Unaudited Financial Information”.
NEW AND REVISED RESERVES EVALUATION GUIDELINES AND BEST PRACTICES FOR INDUSTRY STAKEHOLDERS
For greater transparency and accuracy of current values and future cash flows, Razor has elected to include all abandonment, decommissioning and reclamation costs (“ADR”) and inactive well costs (“IWC”) in accordance with best-practice recommendations into the Company’s 2018 year-end reserves report.
In 2018, the Calgary Chapter of the Society of Petroleum Evaluation Engineers (“SPEE”) and associated industry professionals updated the COGE Handbook. The updates clarify and streamline existing guidelines and offer additional guidance regarding Canadian reserves evaluations.
With respect to ADR Costs, the SPEE provided increased guidance for sustainable best practices. Acknowledging the social and environmental responsibility of the oil and gas industry, the COGE Handbook supports the premise that ADR costs should always be considered in the evaluation process and each report must clearly describe ADR costs included and excluded from the report.
With respect to Operating Costs, the SPEE provided broader guidance for IWC and maintenance capital. There is a material change to COGE Handbook guidance with respect to active and inactive costs. Inactive costs such as mineral leases, shut-ins, suspended and capped well-operating costs, etc. should be included in the evaluation to properly represent the assets being evaluated but forecast separately from active asset costs at the property or corporate level, so economic production entities are not unduly burdened.
HIGHLIGHTS
· | Proved Developed Producing (“PDP”) reserves value discounted at 10% (“NPV10”) before tax is $148.7 million, or $6.11 per share net asset value (details below). |
· | For comparison, excluding the impact of total corporate ADR(1) of $28.1 million and IWC(1) of $21.2 million, the PDP at NPV10 would be $198.0 million (11 % increase over year-end 2017). |
· | PDP reserve volumes were 12,193 Mboe (90% oil and liquids), which represents an increase of 2% over year-end 2017. |
· | Total Proved (“1P”) reserves were 15,398 Mboe and Total Proved plus Probable (“2P”) reserves were 20,224 Mboe, which represent an increase of 2% and decrease of 1%, respectively, over year-end 2017. |
· | The Company’s Reserve Life Index(2) is 7.7 years for PDP, 9.7 years for 1P and 12.8 years for 2P reserves based on January 2019 field-reported production of 4,345 boepd. |
· | Razor’s reserves replacement(2) was 116% for PDP, 118% of 1P and 94% of 2P based on total 2018 production of 1,790 MMBoe. |
Notes:
(1) | Razor’s ADR and IWC programs are compliant with the Alberta Energy Regulator’s rules and regulations, scheduled according to remaining reserves life, inflated at 2% per annum and then discounted at 10%. |
(2) | “Reserve life index” and “Reserve replacement” do not have standardized meanings. See “Reader Advisories – Oil and Gas Metrics” contained in this news release. |
2018 CAPITAL EXPENDITURES
Razor spent $15.9 million on exploration, development and acquisition activities in 2018, including reactivations and drilling ($12.0 million) and acquisitions ($3.9 million). This total excludes facilities and pipeline maintenance ($9.0 million) and one-time capital expenditures associated with non-reserve-adding projects ($12.6 million total), comprised of self-generated natural gas power ($9.5 million), an oilfield information technology upgrade ($1.8 million) at South Swan Hills Unit and corporate/energy services related costs ($1.3 million).
2018 INDEPENDENT RESERVES EVALUATION
Incorporating the significant changes recommended by the SPEE noted above (ADR and IWC), Sproule, qualified reserves evaluators, carried out its independent reserve evaluation effective December 31, 2018, which was prepared in accordance with definitions, standards and procedures contained in the COGE Handbook and in NI 51-101. The reserves evaluation was based on Sproule forecast pricing and foreign exchange rates as at December 31, 2018 as outlined herein.
Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without the inclusion of any royalty interest) unless otherwise noted.
RESERVES SUMMARY
Summary of Gross Oil and Gas Reserves as of December 31, 2018(1), (2), (3), (4)
Light and Medium Crude Oil |
Conventional Natural Gas |
Natural Gas Liquids | Barrels of Oil Equivalent |
|
Gross | Gross | Gross | Gross | |
(Mbbl) | (MMcf) | (Mbbl) | (Mboe) | |
Proved | ||||
Developed Producing | 8,363 | 7,682 | 2,550 | 12,194 |
Developed Non-Producing | 1,136 | 948 | 341 | 1,634 |
Undeveloped | 1,382 | 424 | 116 | 1,569 |
Total Proved | 10,881 | 9,054 | 3,008 | 15,397 |
Probable | 3,410 | 2,844 | 942 | 4,826 |
Total Proved plus Probable | 14,291 | 11,897 | 3,950 | 20,223 |
Net Present Value of Future Net Revenues Before Income Taxes Discounted at (% per Year) (M$)
0% | 5% | 10% | 15% | 20% | |
Proved | |||||
Developed Producing | 156,661 | 169,270 | 148,671 | 128,361 | 112,178 |
Developed Non-Producing | 41,365 | 30,169 | 23,183 | 18,484 | 15,145 |
Undeveloped | 47,600 | 34,804 | 25,879 | 19,553 | 14,957 |
Total Proved | 245,626 | 234,242 | 197,733 | 166,398 | 142,280 |
Probable | 151,287 | 89,509 | 58,854 | 41,541 | 30,793 |
Total Proved plus Probable | 396,913 | 323,751 | 256,587 | 207,939 | 173,073 |
Notes:
(1) | The tables summarize the data contained in the Sproule Report and as a result may contain slightly different numbers due to rounding. |
(2) | Gross reserves means the total working interest (operating or non-operating) share of remaining recoverable reserves owned by Razor before deductions of royalties payable to others and without including any royalty interests owned by Razor. |
(3) | Based on Sproule’s December 31, 2018 escalated price forecast. See “Summary of Pricing and Inflation Rate Assumptions – Forecast Prices and Costs”. |
(4) | The net present value of future net revenue attributable to the Company’s reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, well abandonment, decommissioning and reclamation costs, and inactive well costs. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Company’s reserves estimated by Sproule represent the fair market value of those reserves. Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein. The recovery and reserve estimates of the Company’s oil, NGL and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein. |
NET ASSET VALUE(1)
Net Asset Value, including estimated December 31, 2018 cash and working capital was:
NPV10 (M$) | Net Asset Value per share(1,2,3) |
|
Proved Developed Producing | 148,671 | $6.11 |
Total Proved | 197,733 | $9.34 |
Proved Plus Probable | 209,047 | $10.09 |
Notes:
(1) | The estimated Net Asset Values are based on the estimated net present value of all future net revenue from Razor’s reserves (net of ADR and IWC costs), before tax, as estimated by Sproule as at December 31, 2018. All Net Asset Values cited in this press release are the resulting NPV per reserves category per basic share less net debt of $55.8 million at December 31, 2018. See “Reader Advisories – Oil and Gas Metrics” and “Reader Advisories – Non-IFRS Measures” contained in this news release. |
(2) | Basic shares outstanding of approximately 15.2 million at December 31, 2018. There are no dilutive instruments currently outstanding. |
(3) | All 2018 financial amounts are unaudited. See “Reader Advisories – Unaudited Financial Information”. |
Summary of Pricing and Inflation Rate Assumptions – Forecast Prices and Costs
The forecast cost and price assumptions assume increases in wellhead selling prices and include inflation with respect to future operating and capital costs. Crude oil and natural gas benchmark reference pricing, inflation and exchange rates utilized by Sproule as at December 31, 2018 were as follows:
Year | Exchange Rate (CAD/USD) |
WTI Cushing Oklahoma 40 API (USD/bbl) |
Canadian Light Sweet 40 API (CAD/bbl) |
Hardisty Bow River 25 API (CAD/bbl) |
Natural Gas AECO (CAD/mmbtu) |
2019 | 0.77 | 63.00 | 75.27 | 60.97 | 1.95 |
2020 | 0.80 | 67.00 | 77.89 | 63.87 | 2.44 |
2021 | 0.80 | 70.00 | 82.25 | 68.27 | 3.00 |
2022 | 0.80 | 71.40 | 84.79 | 70.37 | 3.21 |
2023 | 0.80 | 72.83 | 87.39 | 72.54 | 3.30 |
2024 | 0.80 | 74.28 | 89.14 | 73.99 | 3.39 |
2025 | 0.80 | 75.77 | 90.92 | 75.47 | 3.49 |
2026 | 0.80 | 77.29 | 92.74 | 76.98 | 3.58 |
2027+ | +2.0%/yr. | +2.0%/yr. | +2.0%/yr. | +2.0%/yr. | +2.0%/yr. |
Reconciliation of Company Gross Reserves by Principal Product Type(1), (2)
The following table sets forth the reconciliation of the Company’s reserves at Forecast Prices and Costs:
Light and Medium Crude Oil |
Natural Gas Liquids |
||||||||||||
Factors | Gross Proved Developed Producing (Mbbl) |
Gross Proved (Mbbl) |
Gross Proved + Probable (Mbbl) |
Gross Proved Developed Producing (Mbbl) |
Gross Proved (Mbbl) |
Gross Proved + Probable (Mbbl) |
|||||||
December 31, 2017 | 8,141 | 10,188 | 14,024 | 2,533 | 3,327 | 4,303 | |||||||
Acquisitions | 678 | 868 | 1,058 | 68 | 91 | 111 | |||||||
Category Change | 796 | 11 | 8 | 402 | (1 | ) | (3 | ) | |||||
Disposition | – | – | – | – | – | – | |||||||
Extensions/Infill Drilling | 12 | 85 | 93 | 2 | 28 | 33 | |||||||
Economic Factors | 67 | 89 | 120 | 14 | 19 | 26 | |||||||
Technical Revision | (125 | ) | 859 | 219 | (29 | ) | (6 | ) | (64 | ) | |||
Working Interest Adj. | (53 | ) | (67 | ) | (78 | ) | (32 | ) | (41 | ) | (49 | ) | |
Production | (1,153 | ) | (1,153 | ) | (1,153 | ) | (408 | ) | (408 | ) | (408 | ) | |
December 31, 2018 | 8,363 | 10,880 | 14,291 | 2,550 | 3,009 | 3,949 | |||||||
Conventional Natural Gas |
Barrels of Oil Equivalent | ||||||||||||
Factors | Gross Proved Developed Producing (Mmcf) |
Gross Proved (Mmcf) |
Gross Proved + Probable (Mmcf) |
Gross Proved Developed Producing (Mboe) |
Gross Proved (Mboe) |
Gross Proved + Probable (Mboe) |
|||||||
December 31, 2017 | 7,412 | 9,343 | 12,001 | 11,909 | 15,072 | 20,327 | |||||||
Acquisitions | 342 | 488 | 601 | 803 | 1,040 | 1,269 | |||||||
Category Change | 1,005 | 223 | 263 | 1,366 | 47 | 49 | |||||||
Disposition | – | – | – | – | – | – | |||||||
Extensions/Infill Drilling | 12 | (57 | ) | (74 | ) | 16 | 106 | 114 | |||||
Economic Factors | (21 | ) | (8 | ) | (32 | ) | 78 | 107 | 141 | ||||
Technical Revision | 422 | 564 | 679 | (84 | ) | 946 | 268 | ||||||
Working Interest Adj. | (114 | ) | (138 | ) | (162 | ) | (104 | ) | (131 | ) | (154 | ) | |
Production | (1,376 | ) | (1,376 | ) | (1,376 | ) | (1,790 | ) | (1,790 | ) | (1,790 | ) | |
December 31, 2018 | 7,681 | 9,054 | 11,900 | 12,193 | 15,397 | 20,223 | |||||||
Notes:
(1) | The tables summarize the data contained in the Sproule Report and as a result may contain slightly different numbers due to rounding. |
(2) | Conventional Natural Gas includes associated and non-associated gas. |
Future Development Costs
The following table sets forth development costs deducted in the estimation of Razor’s future net revenue attributable to the reserve categories noted below:
Forecast Prices and Costs (M$) | ||
Year | Proved Reserves | Proved plus Probable |
2019 | 1,585 | 1,990 |
2020 | 12,521 | 24,561 |
2021 | 28,619 | 34,096 |
2022 | – | – |
Thereafter | – | – |
Total Undiscounted | 42,725 | 60,647 |
Total Discounted at 10% | 35,929 | 51,482 |
The future development costs are estimates of capital expenditures required in the future for Razor to convert proved developed non-producing reserves and probable reserves to proved developed producing reserves. The undiscounted future development costs are $42.7 million for proved reserves and $60.6 million for proved plus probable reserves (in each case based on forecast prices and costs).
SPECIAL SHAREHOLDER MEETING
The Company also announces that a special meeting of shareholders of the Company (the “Meeting”) will be held on Monday, April 1, 2019 at 1:00 p.m. at the offices of McCarthy Tetrault LLP, the Company’s legal counsel, Suite 4000, 421 – 7th Avenue S.W., Calgary, Alberta. At the Meeting, shareholders will be asked to approve a special resolution to amend the articles of the Company to create a new class of an unlimited number of preferred shares, issuable in series.
Razor believes that the capacity to issue preferred shares will provide the Company with increased flexibility in its capital structure and in raising future capital. The creation of the preferred shares would permit management of the Company to negotiate with potential investors regarding the rights and preferences of a series of preferred shares that may be issued to meet market conditions and financing opportunities as they arise, without the expense and delay in connection with calling a shareholders’ meeting to approve specific terms of any series of preferred shares.
A management information circular and related meeting materials will be mailed to the Company’s registered shareholders and will be available under the Company’s profile on SEDAR at www.sedar.com.
ABOUT RAZOR
Razor is a publicly-traded junior oil and gas development and production company headquartered in Calgary, Alberta, concentrated on acquiring, and subsequently enhancing, producing oil and gas properties primarily in Alberta. The Company is led by experienced management and a strong, committed Board of Directors, with a long-term vision of growth and distributions to shareholders, focused on efficiency and cost control in all areas of the business. Razor currently trades on TSX Venture Exchange under the ticker “RZE”.