CALGARY, Alberta, March 12, 2019 (GLOBE NEWSWIRE) — GRANITE OIL CORP. (“Granite” or the “Company”) (TSX:GXO)(OTCQX:GXOCF) is pleased to present the summary results of the independent reserves report (the “Sproule Report”) prepared by Sproule Associates Limited (“Sproule”) with an effective date of December 31, 2018.
In 2018, Granite invested approximately $10.2 million of capital expenditures (unaudited), all organically, into its 100%-owned Bakken oil property. This represents a decrease of approximately 46% in year-over-year capital spending. During the year, Granite drilled and completed only three 100% working interest horizontal development wells and converted one producing oil well to gas injection, and still replaced its Proved Developed Producing (‘PDP’) oil reserves by 106%. Associated PDP finding and development costs for oil were $13.26 per barrel, generating a recycle ratio of 2.3, despite highly depressed crude oil prices which negatively impacted the Company’s operating netback during the fourth quarter. With three consecutive years of top-tier recycle ratios, Granite’s Bakken development continues to demonstrate strong efficiencies in converting barrels in the ground to developed producing reserves.
The three development wells drilled in 2018 were completed with higher frac sand densities than historically utilized by the Company, and have produced at the highest combined average rate achieved to date when compared to the three prior years’ development wells. The Company is focused on continuing to prove this trend in 2019 to ultimately increase reserves per well. The number of booked undeveloped locations was not increased in the Sproule Report nor was the associated future net capital, thus maintaining a significant inventory of potential infill drilling locations in excess of current bookings.
During 2018, the Company shut-in its shallow gas production resulting in a reserves category shift from PDP to proved developed non-producing (‘PDNP’) reserves in the 2018 Sproule Report. Accordingly, to provide a more accurate representation of relevant reserves metrics, unless otherwise indicated, all finding and development costs and recycle ratios set out in this news release have been calculated for Company Gross Reserves for oil and NGL volumes using an adjusted operating netback (prior to hedging) of $30.01 per barrel, versus the Company’s all-in operating netback (prior to hedging) of $29.75 per barrel of oil equivalent.
2018 Oil Reserves Highlights (1)(2)(3)
Proved Developed Producing (PDP) reserves
- F&D costs were $13.26 per barrel, resulting in a PDP recycle ratio of 2.3 times
- Increased 0.7% to 7,013 mbbls 2018, from 6,966 mbbls in 2017
- Reserves replacement of 106%
Total Proved (TP) reserves
- F&D costs including change in future development capital (‘FDC’) were $12.39 per barrel, resulting in a TP recycle ratio of 2.4 times
- Increased 1.0% to 12,314 mbbls in 2018, from 12,188 mbbls in 2017
- Reserves replacement of 118%
Proved Plus Probable (P+P) reserves
- F&D costs including change in FDC were $20.40 per barrel, resulting in a 2P recycle ratio of 1.5 times
- Decreased 1.3% to 16,364 mbbls in 2018, from 16,571 mbbls
- Reserves replacement of 71%
- “Oil” reserves include all Light, Medium, and Heavy Crude Oil volumes and Natural Gas Liquids (‘NGL’).
- Financial information is based on the Company’s preliminary draft 2018 unaudited financial statements and is therefore subject to revision.
- Recycle ratio is calculated as operating netback divided by F&D costs. The F&D cost includes changes in FDC, where applicable. Calculation is based on estimated 2018 operating netback of $30.01 per barrel, which is calculated as revenue (prior to hedging) less royalties and production costs. See “Readers Advisories” for the method of calculating operating netback.
Net Asset Values
The present value of the Company’s future net revenues (based on Sproule’s December 31, 2018 escalated price forecast) discounted at 10% (PV10) before taxes of Granite’s reserves (including associated and non-associated gas), as set out in the Sproule Report, less estimated net debt of approximately $47.5 million at December 31, 2018, per fully diluted common share are as set out below:
|Proved Developed Producing||$2.29/share|
|Total Proved Plus Probable||$6.70/share|
Granite’s Bakken property produced an average of approximately 1,982 bbls of oil per day (1,995 boe per day) during 2018. Granite’s average realized operating netback (prior to hedging) for the period is estimated to be $30.01 per barrel ($29.75 per boe).