CALGARY, AB – Crew Energy Inc. (TSX: CR) (OTC: CWEGF) of Calgary, Alberta (“Crew” or the “Company”) is pleased to provide highlights from our independent corporate reserves evaluation prepared by Sproule Associates Ltd. (“Sproule”) with an effective date of December 31, 2020 (the “Sproule Report”).
2020 RESERVES HIGHLIGHTS
Highlights of our proved developed producing (“PDP”), total proved (“1P”) and total proved plus probable (“2P”) reserves from the Sproule Report are provided below. All finding, development and acquisition (“FD&A”)1,2 costs and finding and development (“F&D”)1,2 costs below include changes in future development capital (“FDC”) unless otherwise noted.
In response to low commodity prices caused by a price war between OPEC+ members in the first half of the year coupled with global oil demand destruction related to the COVID-19 pandemic, Crew executed a modest capital program for the majority of 2020. After formulating our two-year asset development initiative, as first outlined in Crew’s December 10, 2020 news release, we began executing our plan designed to efficiently calibrate production to match infrastructure and transportation commitments and expand margins. As a result, Crew’s net capital expenditures3 for the year after the impact of the strategic infrastructure transactions (as announced Feb. 27 and Nov. 5, 2020) totaled $28.1 million ($86.3 million gross1), with 48% of the total gross capital invested during Q4/20. Capital was primarily allocated to the drilling of 12.0 net extended reach horizontal (“ERH”) wells and the completion of 7.0 net wells at Greater Septimus.
- Record Low PDP F&D and FD&A Costs1,2: With the funds received from the infrastructure transactions combined with operational improvements and declining capital costs, Crew achieved a record low PDP F&D costs1,2 of $6.83 per boe and FD&A costs1,2 of $2.00 per boe in 2020, resulting in recycle ratios1,2 of 1.77x and 6.05x, respectively. Further, the Company achieved our seventh consecutive year of declining average three-year 2P F&D costs of $2.26 per boe and FD&A costs of $0.92 per boe, with corresponding reductions of 60% and 82%, respectively, from the three-year averages posted in 2019.
2020 F&D and FD&A Costs1,2 |
|||||||
F&D per |
F&D |
FD&A |
FD&A |
||||
PDP |
$6.83 |
1.77 |
$2.00 |
6.05 |
|||
1P |
($0.97) |
(12.48) |
($7.78) |
(1.55) |
|||
2P |
($12.26) |
(0.99) |
($20.40) |
(0.59) |
- Strong Capital Efficiencies and Recycle Ratios1,2: The bulk of Crew’s Q4/20 development activity occurred at the Company’s 9-5 pad, where per well costs averaged 12% below forecasts. Lower costs and improved liquids pricing set the 9-5 pad on track to become the most efficient in our history, with improved completions design, longer ERH wells and faster drill times generating strong capital efficiencies and recycle ratios. 2P F&D costs2 for the 9-5 pad totaled $3.05 per boe compared to $4.90 per boe when the wells were originally booked in West Septimus. Improved capital efficiencies supported the reduction of FDC costs by $95 million and $180 million for 1P reserves and 2P reserves, respectively, with decreases of 11% and 10% compared to year-end 2019, respectively, creating negative finding costs when the change in future capital is included.
- Significant PDP Reserves Growth: In 2020, Crew added 12.0 MMboe of PDP reserves, prior to accounting for production, representing approximately 19% of 2019 PDP reserves with a reserve replacement ratio of 150%, bringing the total to 67.1 MMboe at year-end after accounting for production, a 6% increase over 2019.
- 1P and 2P Reserves Stable Year-Over-Year: Crew’s 1P and 2P reserves in 2020 remained stable year-over-year, as reserve additions in both categories offset the negative impact of weaker pricing following the onset of the COVID-19 pandemic. With 8.6 MMboe of 1P reserves added, production was effectively replaced by 106%, resulting in 202.5 MMboe of 1P reserves at year end, while 2P reserves replaced 93% of production and remained at 410.0 MMboe.
________________________________________________________________________ |
1 All 2020 financial amounts are unaudited. See advisories. |
2 “Finding, Development and Acquisitions costs” or “FD&A costs”, “Finding and Development costs” or “F&D costs” and “recycle ratio” do not have standardized meanings. See the tables under “Capital Program Efficiency” and “Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS measures” contained in this news release. |
3 Non-IFRS Measure. “Operating netback” and “net capital expenditures” do not have standardized measures prescribed by International Financial Reporting Standards (“IFRS”), and therefore may not be comparable with the calculations of similar measures for other companies. See “Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS Measures” within this press release and the Company’s MD&A for details including reasons for use. |
4 Crew’s estimated operating netback in fourth quarter 2020, used in the above calculations, averaged $12.08 per boe (unaudited), while the Company’s estimated full year 2020 operating netback averaged $9.03 per boe (unaudited). See ‘Unaudited Financial Information’ and ‘Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS Measures’ in the advisories. |
2020 RESERVES DETAIL
The detailed reserves data set forth below is based upon the Sproule Report with an effective date of December 31, 2020. The following presentation summarizes the Company’s crude oil, natural gas liquids and conventional natural gas reserves and the net present values before income tax of future net revenue for the Company’s reserves using forecast prices and costs based on the Sproule Report. The Sproule Report has been prepared in accordance with definitions, standards, and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). The reserves evaluation was based on Sproule forecast escalated pricing and foreign exchange rates at December 31, 2020 as outlined in the table herein entitled “Price Forecast”.
All evaluations and summaries of future net revenue are stated prior to provision for interest, debt service charges and general administrative expenses, the input of hedging activities and after deduction of royalties, operating costs, estimated well abandonment and reclamation costs (“ARC”) associated with the Company’s assets in the reserve report and estimated future capital expenditures associated with reserves. It should not be assumed that the estimates of net present value of future net revenues presented in the tables below represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and conventional natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, conventional natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without including any royalty interests) unless noted otherwise. In addition to the detailed information disclosed in this news release, more detailed information as prescribed by NI 51-101 will be included in the Company’s Annual Information Form (the “AIF”) for the year ended December 31, 2020, which will be filed on the Company’s profile at www.sedar.com on or before March 31, 2021.
See “Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS Measures” for additional cautionary language, explanations and discussions and “Forward Looking Information and Statements” for a statement of principal assumptions and risks that may apply.
Corporate Reserves1,2,5
Light Crude Oil |
Heavy Crude |
Natural Gas |
Conventional |
Barrels of |
|
(mbbl) |
(mbbl) |
(mbbl) |
(mmcf) |
(mboe) |
|
Proved |
|||||
Developed Producing |
261 |
808 |
13,806 |
313,475 |
67,120 |
Developed Non-producing |
10 |
633 |
283 |
7,035 |
2,099 |
Undeveloped |
3,222 |
1,791 |
27,202 |
606,328 |
133,269 |
Total Proved |
3,493 |
3,232 |
41,291 |
926,838 |
202,488 |
Total Probable |
3,484 |
3,071 |
45,064 |
935,232 |
207,490 |
Total Proved plus Probable |
6,977 |
6,302 |
86,354 |
1,862,069 |
409,978 |
Notes: |
1 Reserves have been presented on a “gross” basis which is defined as Crew’s working interest (operating and non-operating) share before deduction of royalties and without including any royalty interest of the Company. |
2 Based on Sproule’s December 31, 2020 escalated price forecast. |
3 Reflects 100% Conventional Natural Gas by product type. |
4 Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. |
5 Columns may not add due to rounding. |
Reserves Values1,2,3,4
The estimated before tax net present value (“NPV”) of future net revenues associated with Crew’s reserves effective December 31, 2020 and based on the Sproule Report and the published Sproule (December 31, 2020) future price forecast are summarized in the following table:
(m$) |
0% |
5% |
10% |
15% |
20% |
Proved |
|||||
Developed Producing |
630,840 |
491,026 |
397,521 |
335,513 |
292,261 |
Developed Non-producing |
22,168 |
16,169 |
12,760 |
10,570 |
9,028 |
Undeveloped |
1,524,984 |
794,096 |
452,622 |
273,132 |
169,004 |
Total Proved |
2,177,992 |
1,301,291 |
862,903 |
619,216 |
470,293 |
Total Probable |
3,373,888 |
1,470,649 |
780,378 |
470,395 |
309,922 |
Total Proved plus Probable |
5,551,880 |
2,771,941 |
1,643,280 |
1,089,611 |
780,215 |
Notes: |
1 Based on Sproule’s December 31, 2020 escalated price forecast. See “Price Forecast”. |
2 The estimated future net revenues are stated prior to provision for interest, debt service charges, general administrative expenses, the impact of hedging activities, and after deduction of royalties, operating costs, ARC associated with the Company’s assets and estimated future capital expenditures. |
3 The after-tax present values of future net revenue attributed to Crew’s reserves will be included in the Company’s 2020 AIF to be filed on or before |
4 Columns may not add due to rounding. |
Price Forecast
Sproule updated pricing for year end 2020 reflects changes to the COGE Handbook that are expected to come into effect in April 2021. The updated guidance recommends a tolerance tied to benchmark strip pricing, suggesting forecasts should not deviate more than 20% from current strip pricing in the first two years of forecasting. For the third year of forecasting, discretion can be incorporated based on the issuer’s professional judgement. Beyond the third year, real prices should be adjusted by inflation.
The Sproule December 31, 2020 price forecast is summarized as follows:
Year |
Exchange |
WTI @ |
Canadian |
Western |
Natural gas at |
Westcoast |
($US/$Cdn) |
(US$/bbl) |
(C$/bbl) |
(C$/bbl) |
(C$/mmbtu) |
(C$/mmbtu) |
|
2021 |
0.770 |
46.00 |
54.55 |
43.51 |
2.86 |
2.76 |
2022 |
0.770 |
48.00 |
57.14 |
46.10 |
2.78 |
2.68 |
2023 |
0.770 |
53.00 |
63.64 |
52.60 |
2.69 |
2.59 |
2024 |
0.770 |
54.06 |
64.91 |
53.65 |
2.75 |
2.64 |
2025 |
0.770 |
55.14 |
66.21 |
54.72 |
2.80 |
2.69 |
2026 |
0.770 |
56.24 |
67.53 |
55.82 |
2.86 |
2.75 |
2027 |
0.770 |
57.37 |
68.88 |
56.93 |
2.91 |
2.80 |
2028 |
0.770 |
58.52 |
70.26 |
58.07 |
2.97 |
2.86 |
2029 |
0.770 |
59.69 |
71.66 |
59.23 |
3.03 |
2.92 |
2030 |
0.770 |
60.88 |
73.10 |
60.42 |
3.09 |
2.97 |
2031 |
0.770 |
62.10 |
74.56 |
61.63 |
3.15 |
3.03 |
2031 +(1) |
2.0%/yr |
2.0%/yr |
2.0%/yr |
2.0%/yr |
2.0%/yr |
Note: |
1 Escalated at 2.0% per year starting in 2031 with the exception of foreign exchange which remains flat. |
2 Product sale prices will reflect these reference prices with further adjustments for quality and transportation to point of sale. |
Reserves Reconciliation
The following reconciliation of Crew’s gross reserves compares changes in the Company’s reserves as at December 31, 2020 based on the Sproule (December 31, 2020) future price forecast relative to the reserves as at December 31, 2019.
MBOE |
|||
FACTORS |
Total Proved |
Total Probable |
Total Proved + |
December 31, 2019 |
201,982 |
208,593 |
410,574 |
Extensions and Improved Recovery1 |
212 |
109 |
321 |
Infill Drilling |
0 |
0 |
0 |
Technical Revisions |
15,261 |
(4,822) |
10,438 |
Discoveries |
0 |
0 |
0 |
Acquisitions |
0 |
0 |
0 |
Dispositions |
(50) |
(104) |
(154) |
Economic Factors |
(6,881) |
3,715 |
(3,166) |
Production |
(8,035) |
0 |
(8,035) |
December 31, 2020 |
202,488 |
207,490 |
409,978 |
Notes: |
1 Increases to Extensions and Improved Recovery are the result of step-out locations drilled or proposed to be drilled by Crew. Reserves additions for improved recovery and extensions are combined and reported as “Extensions and Improved Recovery”. |
2 Columns may not add due to rounding. |
3 See the tables under “Reserves Reconciliation by Product Types” contained in this news release for a reconciliation by product type in accordance with NI 51-101. |
Corporate level technical revisions on a boe basis were +8% at the Proved level and +3% at the Proved plus Probable level. Technical revisions were primarily due to reserves reclassification and performance adjustments attributable to the Company’s 2020 capital program, annual maintenance of stale or low priority future development bookings, well performance changes and adjustments to timing of future development locations. Other material revisions were attributable to the Company’s updated development planning resulting in adjustments to future development bookings, reflective of a continuing shift towards ERH well designs and adjustments to carbon tax modeling.
Economic factors in the Proved and Proved plus Probable categories were negative 6.9 MMboe and 3.2 MMboe, respectively, due to the impact of updated Sproule pricing to reflect changes to the COGE Handbook.
Future Development Capital
The following table provides a summary of the estimated FDC required to bring Crew’s reserves on production. Changes in forecast FDC occur annually due to development activities, acquisition and disposition activities, and changes in capital cost estimates. Crew realized significant FDC reductions from the 2019 year-end Sproule Report on 1P FDC of $95 million and on 2P FDC of $180 million largely due to improved capital efficiencies.
Future Development Capital ($millions)1 |
Total Proved |
Total Proved plus |
2021 |
97 |
103 |
2022 |
142 |
163 |
2023 |
167 |
190 |
2024 |
180 |
232 |
2025 |
104 |
154 |
Remainder |
61 |
765 |
Total FDC undiscounted |
751 |
1,607 |
Total FDC discounted at 10% |
572 |
1,021 |
Notes: |
1 Reflects development costs deducted by Sproule in the Sproule Report in the estimation of future net revenue attributed to the noted reserve categories using Sproule’s forecast pricing and foreign exchange rates at December 31, 2020. |
2 Columns may not add due to rounding. |
Capital Program Efficiency – Including FDC
2020 |
2018-2020 Avg. |
|||||
PDP |
1P |
2P |
PDP |
1P |
2P |
|
Exploration and Development Expenditures1,5 ($ thousands) |
86,260 |
86,260 |
86,260 |
303,573 |
303,573 |
303,573 |
Acquisitions/(Dispositions)1,5 |
(58,150) |
(58,150) |
(58,150) |
(87,039) |
(87,039) |
(87,039) |
Change in Future Development Capital1 ($ thousands) |
||||||
– Exploration and Development |
(4,100) |
(94,579) |
(179,332) |
3,072 |
21,181 |
(156,294) |
– Acquisitions/Dispositions |
0 |
0 |
(525) |
0 |
(50) |
(575) |
Reserves Additions with Revisions and Economic Factors (mboe) |
||||||
– Exploration and Development |
12,033 |
8,592 |
7,594 |
32,172 |
58,318 |
65,114 |
– Acquisitions/Dispositions |
0 |
(50) |
(154) |
0 |
(117) |
(254) |
12,033 |
8,542 |
7,440 |
32,172 |
58,201 |
64,860 |
2020 |
2018-2020 Avg. |
|||||
PDP |
1P |
2P |
PDP |
1P |
2P |
|
Finding & Development Costs2,3 – with revisions and economic factors |
6.83 |
(0.97) |
(12.26) |
9.53 |
5.57 |
2.26 |
Finding, Development & Acquisition Costs2,3 – with revisions and economic factors |
2.00 |
(7.78) |
(20.40) |
6.83 |
4.08 |
0.92 |
Recycle Ratio3 (F&D) |
1.77 |
(12.48) |
(0.99) |
|||
Reserves Replacement4,3 |
150% |
106% |
93% |
Capital Program Efficiency – Excluding FDC
2020 |
2018-2020 Avg. |
|||||
PDP |
1P |
2P |
PDP |
1P |
2P |
|
Exploration and Development Expenditures1,5 ($ thousands) |
86,260 |
86,260 |
86,260 |
303,573 |
303,573 |
303,573 |
Acquisitions/(Dispositions)1,5 |
(58,150) |
(58,150) |
(58,150) |
(87,039) |
(87,039) |
(87,039) |
Reserves Additions with Revisions and Economic Factors (mboe) |
||||||
– Exploration and Development |
12,033 |
8,592 |
7,594 |
32,172 |
58,318 |
65,114 |
– Acquisitions/Dispositions |
0 |
(50) |
(154) |
0 |
(117) |
(254) |
12,033 |
8,542 |
7,440 |
32,172 |
58,201 |
64,860 |
2020 |
2018-2020 Avg. |
|||||
PDP |
1P |
2P |
PDP |
1P |
2P |
|
Finding & Development Costs2,3 – with revisions and economic factors |
7.17 |
10.04 |
11.36 |
9.44 |
5.21 |
4.66 |
Finding, Development & Acquisition Costs2,3 – with revisions and economic factors |
2.34 |
3.29 |
3.78 |
6.74 |
3.72 |
3.34 |
Recycle Ratio3 (F&D) |
1.69 |
1.20 |
1.06 |
Notes: |
1 The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development capital generally will not reflect total finding and development costs related to reserve additions for that year. |
2 F&D and FD&A costs above are calculated, as noted, both before and after changes in FDC required to bring proved undeveloped and developed reserves into production, by dividing the identified capital expenditures by the applicable reserves additions. |
3 Recycle ratio is defined as operating netback per boe divided by F&D costs on a per boe basis. Operating netback is a Non-IFRS Measure and is calculated as revenue (including realized hedging gains and losses) minus royalties, operating expenses, and transportation expenses. Crew’s estimated operating netback in fourth quarter 2020, used in the above calculations, averaged $12.08 per boe (unaudited), while the Company’s full year 2020 estimated operating netback averaged $9.03 per boe (unaudited). These amounts are estimates and subject to audit verification. See ‘Unaudited Financial Information’ and ‘Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS Measures’ in the advisories. |
4 “Reserves Replacement”, “FD&A Cost”, “F&D Cost”, “Operating Netback” and “Recycle Ratio” do not have standardized meanings and therefore may not be comparable with the calculation of similar measures for other entities. See “Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS Measures” in the advisories. |
5 All 2020 financial amounts are unaudited. See advisories. |