CALGARY, Alberta – Prairie Provident Resources Inc. (“Prairie Provident”, “PPR” or the “Company”) is pleased to announce the results of our independent 2020 year-end reserves evaluation conducted by Sproule Associates Limited (“Sproule”) with an effective date of December 31, 2020 (the “Sproule Report”).
With recent commodity price recovery and additional liquidity provided by our lender, Prairie Provident has restarted its development program focusing on the Glauconite and Ellerslie formations in the Princess area. We expect the 2021 drilling program and ARO expenditures to be funded from cash flows from operations and liquidity available under our revolving note facility.
2020 RESERVES HIGHLIGHTS
- At year-end 2020, reserves totaled 8.2 MMboe, 18.3 MMboe, and 27.9 MMboe for proved developed producing (PDP) reserves, total proved (1P) reserves, and total proved plus probable (2P) reserves, respectively.
- Lower price forecasts resulted in reserves reductions of 1.2MMboe, 2.8 MMboe and 5.8 MMboe for PDP, 1P and 2P, respectively. This includes economic factors, as well as removing reserves from uneconomic locations and shutting in uneconomic fields.
- Improved well performance at Princess and waterflood response at Evi resulted in positive technical revisions of 1.0 MMboe, 1.1MMboe and 0.8 MMboe for PDP, 1P and 2P, respectively. This contributed to overall PDP finding & development (“F&D”)(1)(2) costs of $4.78/boe, including technical revisions.
- During 2020, the downturn in commodity prices necessitated suspension of capital development so there were no material reserves added from drilling.
- Year-end 2020 estimated net present values of future net revenue before tax discounted at 10% (“NPV10 BT”) for PDP, 1P and 2P reserves totaled $54.7 million, $107.4 million and $218.0 million, respectively.
- Approximately 100% of PPR’s total estimated abandonment and reclamation obligations (ARO) is included in the 2020 reserves evaluation (2019 – approximately 79%).
- Reserve life index(1) was 4.7 years, 10.5 years and 16.0 years on a PDP, 1P and 2P basis, respectively.
(1) “Finding & Development Costs” and “Reserve Life Index” does not have a standardized meaning. See “Cautionary Statements – Disclosure of Oil and Gas Reserves Data and Operational Information” and “Cautionary Statements – Reserve Life Index” below.
(2) All 2020 financial information is unaudited. See advisories.
The following presentation summarizes certain information contained in the Sproule Report, which was prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) and the definitions, standards, and procedures contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”). Sproule evaluated 100% of the Company’s reserves. The Sproule Report is based on forecast prices and costs and applies Sproule’s forecast escalated commodity price deck and foreign exchange rate and inflation rate assumptions as at December 31, 2020. Estimated future net revenue is stated without any provisions for interest costs, other debt service charges or general and administrative expenses, and after the deduction of royalties, estimated operating costs, estimated abandonment and reclamation costs and estimated future development costs.
Additional information regarding the Company’s reserves data and other oil and gas information will be included in the Company’s Annual Information Form for the year ended December 31, 2020 (the “AIF”), which will be filed under the Company’s issuer profile on SEDAR at www.sedar.com on or before March 31, 2021.
See also the “Cautionary Statements” below for further explanations and discussions.
Summary of Corporate Reserves(1)(2)(5)
The following table is a summary of the Company’s estimated reserves as at December 31, 2020, as evaluated in the Sproule Report.
|Reserves Category||Light and
|Barrels of Oil
|Total Proved plus Probable||18,534||1,303||9,588||34,624||696||27,902|
(1) Reserves are presented on a “company gross” basis, which is defined as Prairie Provident’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 forecast prices and costs. The forecast of commodity prices used in the Sproule Report can be found at www.sproule.com.
(3) Including both non-associated gas and associated gas but excluding solution gas (gas dissolved in crude oil).
(4) Oil equivalent amounts have been calculated using a conversion ratio of six thousand cubic feet of natural gas to one barrel of oil. See “Cautionary Statements – Barrels of oil equivalent” below.
(5) Columns may not add due to rounding of individual items.
Net Present Values of Future Net Revenue Before Income Taxes Discounted at (%/year) (1)(2)(3)(4)(5)
The following table is a summary of the estimated net present values of future net revenue (before income taxes) associated with Prairie Provident’s reserves as at December 31, 2020, discounted at the indicated percentage rates per year, as evaluated in the Sproule Report.
|Total Proved plus Probable||189.8||263.1||218.0||172.8||137.4|
(1) Based on Sproule’s December 31, 2020 forecast prices and costs. The forecast of commodity prices used in the Sproule Report can be found at www.sproule.com.
(2) Estimated future net revenues are stated without any provision for interest costs, other debt service charges or general and administrative expenses, and after deduction of royalties, estimated operating costs, estimated abandonment and reclamation costs and estimated future development costs.
(3) Estimated future net revenue, whether discounted or not, does not represent fair market value.
(4) Net present values of future net revenue after income taxes are estimated to approximate the before income tax values based on the estimated future revenues, available tax pools and future deductible expenses.
(5) Columns may not add due to rounding of individual items.
Reconciliation of Company Gross Reserves Based on Forecast Prices and Costs(2)(3)
|December 31, 2019||21,723||12,744||34,466|
|Drilling (Extensions and Improved Recovery(1))||–||196||196|
|Pricing (Economic Factors)||(2,229)||271||(1,958)|
|December 31, 2020||18,261||9,641||27,902|
(1) Reserves additions attributed to Infill Drilling, Improved Recovery and Extensions are combined and reported as “Extensions and Improved Recovery”.
(2) Columns may not add due to rounding.
(3) Company Gross Reserves exclude royalty volumes.
The following table sets out our calculation of finding and development (F&D) costs for 2020. See also “Cautionary Statements – Disclosure of Oil and Gas Reserves Data and Operational Information” and “Cautionary Statements – Finding & Development Costs” below.
|Finding and Development Costs||Proved Developed
|Total Proved||Total Proved plus
|Exploration and development capital(1) (MM$)||4.0||4.0||4.0|
|Change in FDC(2) (MM$)||0||(10.5)||(72.7)|
|Total F&D costs, including change in FDC (MM$)||4.0||(6.5)||(68.9)|
|Total reserves additions, including technical revisions (Mboe)||846||529||(2,841)|
|F&D costs, including change in FDC ($/boe)||4.78||N/A (3)||N/A (3)|
(1) Exploration and development capital (unaudited) related to: land acquisition and retention; drilling; completions; tangible well site; tie-ins; and facilities.
(2) FDC as per Sproule Report, based on Sproule’s December 31, 2020 forecast prices and costs.
(3) Negative change in FDC and negative technical revisions resulted in unmeaningful F&D costs for 1P and 2P reserves.
(4) Columns may not add due to rounding.
ABOUT PRAIRIE PROVIDENT:
Prairie Provident is a Calgary-based company engaged in the exploration and development of oil and natural gas properties in Alberta. The Company’s strategy is to grow organically in combination with accretive acquisitions of conventional oil prospects, which can be efficiently developed. Prairie Provident’s operations are primarily focused at the Michichi and Princess areas in Southern Alberta targeting the Banff, the Ellerslie and the Lithic Glauconite formations, along with an established and proven waterflood project at our Evi area in the Peace River Arch. Prairie Provident protects its balance sheet through an active hedging program and manages risk by allocating capital to opportunities offering maximum shareholder returns.
For further information, please contact:
Prairie Provident Resources Inc.
Tony van Winkoop
President and Chief Executive Officer
Tel: (403) 292-8071
Unaudited financial information
Certain financial and operating information included in this news release for the quarter and year ended December 31, 2020, including operating expenses, general and administrative expenses, and finding and development costs, are based on estimated unaudited financial results for the quarter and year then ended, and are subject to the same limitations as discussed under “Forward-looking information” set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2020 and changes could be material.
Disclosure of Oil and Gas Reserves Data and Operational Information
Prairie Provident’s Statement of Reserves Data and Other Oil and Gas Information for the year ended December 31, 2020, providing additional information regarding our reserves data and oil and gas activities in accordance with NI 51-101, will be contained in our Annual Information Form for the year ended December 31, 2020, which will be filed under the Company’s issuer profile on SEDAR at www.sedar.com on or before March 31, 2021. The reserves data estimates contained herein are estimates only and there is no guarantee that the estimated reserves will be recovered or that the related estimates of future net revenues will be realized. There can be no assurance that the forecast prices and cost assumptions applied by Sproule in evaluating the Company’s reserves will be attained, and variances between actual and forecast prices and costs could be material. Actual reserves may be greater than or less than the estimated volumes provided herein, and it should not be assumed that the estimates of future net revenues presented herein represent the fair market value of the reserves. Estimates in respect of individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation. The Company’s belief that it will establish additional reserves over time with conversion of probable undeveloped reserves into proved reserves is a forward-looking statement and is based on certain assumptions and is subject to certain risks, as discussed below under the heading “Forward-looking information”.
This news release discloses certain metrics commonly used in the oil and natural gas industry – namely “finding and development costs” and “reserve life index” – that do not have standardized meanings or methods of calculation under applicable laws, International Financial Reporting Standards, the COGE Handbook or other applicable professional standards. Accordingly, such measures, as determined by the Company, may not be comparable to similarly defined or labelled measures presented by other companies, and therefore should not be used to make such comparisons. These metrics have been included herein to provide readers with additional information to evaluate the Company’s performance, but should not be relied upon for comparative purposes. Management uses oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare Prairie Provident’s operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this news release, should not be relied upon for investment or other purposes.
Finding and Development Costs (“F&D costs”)
The Company calculates F&D costs by dividing the sum of exploration and development capital for the period, plus the change in estimated FDC required to bring the reserves within the specified reserves category on production, by the change in reserves relating to discoveries, infill drilling, improved recovery, extensions and technical revisions. F&D costs have been presented in this news release because acquisitions and dispositions can have a significant impact on Prairie Provident’s ongoing reserves replacement costs and excluding these amounts could result in an inaccurate portrayal of its cost structure. Management uses F&D as measure of its ability to execute its capital programs (and success in doing so) and of its asset quality.
Reserve Life Index (“RLI”)
The Company calculates RLI based on the estimated reserves amount as at December 31, 2020 for the relevant reserves category, as evaluated by Sproule, divided by 2020 annual production.