CALGARY, Alberta, Feb. 25, 2021 (GLOBE NEWSWIRE) — Razor Energy Corp. (“Razor” or the “Company”) (TSXV: RZE) is pleased to provide a summary of its 2020 year-end reserves evaluation and an updated operational outlook.
The highlights and reserves summary below set forth Razor’s gross reserves at December 31, 2020, as evaluated by Sproule Associates Limited (“Sproule”), qualified reserves evaluators, in an independent report dated February 19, 2021 (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 “COGEH”) 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 April 8, 2021.
Razor’s 2020 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”.
HIGHLIGHTS
(1) “Reserve life index” does not have standardized meaning. See “Reader Advisories – Oil and Gas Metrics” contained in this news release.
OPERATIONAL OUTLOOK
Razor is excited with news it shared last week regarding the multi-year amendment of its existing non-revolving term loan facility and a new term loan and royalty transaction which enhances liquidity. The Company remains focused on advancing its conventional oil and gas base business and reducing indebtedness while responsibly closing out its proportionate share of end-of-life inventory.
Razor continues to enjoy its solid reserves base, comprised of 85% light and medium oil and natural gas liquids, which has a stable, annual base decline of 12%. In 2020, the Company took a disciplined and proactive approach to preserving value through minimal capital expenditures on well repair, maintenance and workovers in response to low commodity prices due to the supply/demand imbalance resulting from COVID-19.
With renewed liquidity, and recent upward trend in commodity prices, Razor has initiated its 46 well reactivation program which will continue throughout 2021 and into 2022. The Company anticipates bringing approximately 1,500 boepd onstream (primarily light oil and natural gas liquids) from this program at similar declines to its existing reserve base. Once reactivated, the PDNP reserves from these wells will shift back to the PDP reserves category.
Currently, Razor’s commitment under the AER’s ABC program is $3.1 million per year. In addition, the Company has been granted $3.5 million in aggregate to round five from Alberta’s Site Rehabilitation Program (“SRP”) through its relationships with trusted service providers. Razor has spent $655 thousand to date under the SRP through well abandonments, reclamation and remediation activities. Since the Company began operations in February 2017, Razor has spent a cumulative $7.3 million on end-of-life activities.
Concurrently, Razor’s subsidiary company, FutEra Power, continues to advance development of its 21 megawatt co-produced geothermal and natural gas hybrid power project in Swan Hills. FutEra anticipates construction to commence during the second quarter of 2021 with plans to deliver power to the grid by first quarter of 2022.
2020 INDEPENDENT RESERVES EVALUATION
Sproule carried out an independent reserves evaluation effective December 31, 2020, which was prepared in accordance with definitions, standards and procedures contained in the COGEH and in NI 51-101. The reserves evaluation was based on Sproule forecast pricing and foreign exchange rates at December 31, 2020 as outlined herein.
Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without the inclusion of any royalty interest) unless otherwise noted.
RESERVES SUMMARY
Summary of Gross Oil and Gas Reserves at December 31, 2020(1), (2), (3), (4)
Light and Medium Crude Oil |
Heavy Crude Oil | Conventional Natural Gas |
Natural Gas Liquids |
Barrels of Oil Equivalent |
|
Gross | Gross | Gross | Gross | Gross | |
(Mbbl) | (Mbbl) | (MMcf) | (Mbbl) | (Mboe) | |
Proved | |||||
Developed Producing | 4,940 | 193 | 4,126 | 1,595 | 7,416 |
Developed Non-Producing | 2,891 | 103 | 784 | 1,343 | 4,468 |
Undeveloped | 1,178 | 291 | 445 | 98 | 1,641 |
Total Proved | 9,009 | 587 | 5,355 | 3,036 | 13,525 |
Probable | 2,637 | 144 | 1,377 | 783 | 3,793 |
Total Proved plus Probable | 11,646 | 731 | 6,732 | 3,819 | 17,319 |
Net Present Value of Future Net Revenue Before Income Taxes Discounted at (% per Year) (M$)
0% | 5% | 10% | 15% | 20% | ||||||
Proved | ||||||||||
Developed Producing | -109,463 | 7,172 | 26,553 | 29,075 | 28,079 | |||||
Developed Non-Producing | 84,169 | 62,960 | 49,199 | 39,730 | 32,904 | |||||
Undeveloped | 32,005 | 25,137 | 19,756 | 15,568 | 12,284 | |||||
Total Proved | 6,712 | 95,269 | 95,508 | 84,372 | 73,267 | |||||
Probable | 86,027 | 54,611 | 37,709 | 27,525 | 20,853 | |||||
Total Proved plus Probable | 92,738 | 149,880 | 133,216 | 111,898 | 94,120 |
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 mean 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, 2020 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 ADR and IWC 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. |
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 | Heavy Oil | |||||||||||
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, 2019 | 7,029 | 10,432 | 13,325 | 209 | 555 | 682 | ||||||
Acquisitions | 258 | 303 | 379 | – | – | – | ||||||
Category Change | – | – | – | – | – | – | ||||||
Disposition | – | – | – | – | – | – | ||||||
Extensions/Infill Drilling | – | – | – | – | – | – | ||||||
Economic Factors | (557 | ) | (1,260 | ) | (1,476 | ) | (22 | ) | (30 | ) | (37 | ) |
Technical Revision | (1,019 | ) | 304 | 189 | 29 | 86 | 110 | |||||
Production | (771 | ) | (771 | ) | (771 | ) | (24 | ) | (24 | ) | (24 | ) |
December 31, 2020 | 4,940 | 9,009 | 11,647 | 193 | 587 | 731 |
Natural Gas Liquids | Conventional Natural Gas | |||||||||||
Factors | Gross Proved Developed Producing (Mbbl) |
Gross Proved (Mbbl) |
Gross Proved + Probable (Mbbl) |
Gross Proved Developed Producing (MMcf) |
Gross Proved (Mmcf) |
Gross Proved + Probable (Mmcf) |
||||||
December 31, 2019 | 2,246 | 3,122 | 3,981 | 9,956 | 12,892 | 16,575 | ||||||
Acquisitions | 128 | 145 | 181 | 342 | 363 | 434 | ||||||
Category Change | – | – | – | – | – | – | ||||||
Disposition | – | – | – | – | – | – | ||||||
Extensions/Infill Drilling | – | – | – | – | – | – | ||||||
Economic Factors | (177 | ) | (361 | ) | (514 | ) | (452 | ) | (501 | ) | (780 | ) |
Technical Revision | (299 | 432 | 473 | (4,386 | ) | (6,003 | ) | (8,163 | ) | |||
Production | (302 | ) | (302 | ) | (302 | ) | (1,335 | ) | (1,335 | ) | (1,335 | ) |
December 31, 2020 | 1,595 | 3,036 | 3,819 | 4,126 | 5,355 | 6,732 |
Barrels of Oil Equivalent | ||||||
Factors | Gross Proved Developed Producing (Mboe) |
Gross Proved (Mboe) |
Gross Proved + Probable (Mboe) |
|||
December 31, 2019 | 11,144 | 16,258 | 20,750 | |||
Acquisitions | 442 | 508 | 633 | |||
Category Change | – | – | – | |||
Disposition | – | – | – | |||
Extensions/Infill Drilling | – | – | – | |||
Economic Factors | (832 | ) | (1,744 | ) | (2,157 | ) |
Technical Revision | (2,020 | ) | (178 | ) | (589 | ) |
Production | (1,319 | ) | (1,319 | ) | (1,319 | ) |
December 31, 2020 | 7,416 | 13,525 | 17,319 |
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 | Total Proved Reserves | Proved plus Probable |
2021 | 12,526 | 24,580 |
2022 | 25,535 | 25,535 |
2023 | 0 | 0 |
Thereafter | 2,525 | 2,525 |
Total Undiscounted | 40,585 | 52,639 |
Total Discounted at 10% | 36,009 | 47,826 |
The future development costs are estimates of capital expenditures required in the future for Razor to convert proved developed and undeveloped non-producing plus probable reserves to proved developed producing reserves. The undiscounted future development costs are $40.6 million for proved reserves and $52.6 million for proved plus probable reserves, in each case based on forecast prices and costs.
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 at December 31, 2020 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) |
2021 | 0.77 | 46.00 | 54.55 | 40.03 | 2.86 |
2022 | 0.77 | 48.00 | 57.14 | 42.42 | 2.78 |
2023 | 0.77 | 53.00 | 63.64 | 48.39 | 2.69 |
2024 | 0.77 | 54.06 | 64.91 | 49.18 | 2.75 |
2025 | 0.77 | 55.14 | 66.21 | 50.16 | 2.80 |
2026 | 0.77 | 56.24 | 67.53 | 51.17 | 2.86 |
2027 | 0.77 | 57.37 | 68.88 | 52.19 | 2.91 |
2028 | 0.77 | 58.52 | 70.26 | 53.23 | 2.97 |
2029+ | 0.77 | +2.0%/yr. | +2.0%/yr. | +2.0%/yr. | +2.0%/yr. |
2020 CAPITAL EXPENDITURES
Razor spent $237 thousand of capital on production-add activities during the year ended December 31, 2020. During 2020, the Company also incurred $538 thousand on end-of-life abandonment and reclamation activities under the Alberta Energy Regulator’s (“AER”) Area Based Closure (“ABC”) program prior to the AER suspending it in mid-2020 for the remainder of the year in response to low commodity prices.
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, focused on efficiency and cost control in all areas of the business. Razor currently trades on TSX Venture Exchange under the ticker “RZE”.
www.razor-energy.com
Razor also has two other active subsidiaries in FutEra Power Corp. (“FutEra”) and Blade Energy Services Corp. (“Blade”).
ABOUT FUTERA
FutEra leverages Alberta’s resource industry innovation and experience to create transitional power and sustainable infrastructure solutions to commercial markets and communities, both in Canada and globally. Currently it is developing a 21 megawatt co-produced geothermal and natural gas hybrid power project in Swan Hills, Alberta.
www.futerapower.com
ABOUT BLADE
Operating in west central Alberta, Blade’s primary services include fluid hauling, road maintenance, earth works including well site reclamation and other oilfield services.
www.blade-es.com
For additional information please contact:
Doug Bailey President and Chief Executive Officer |
OR | Kevin Braun Chief Financial Officer |
Razor Energy Corp. 800, 500-5th Ave SW Calgary, Alberta T2P 3L5 Telephone: (403) 262-0242 www.razor-energy.com |