Calgary, Alberta – OBSIDIAN ENERGY LTD. (TSX: OBE) (NYSE American: OBE) (“Obsidian Energy” or the “Company“) is pleased to announce its independent reserves evaluation for the year ended December 31, 2021, prepared by Sproule Associates Limited (“Sproule“).
“The results of our 2021 reserves report speak to the strength of our assets and our technical teams,” said Stephen Loukas, Obsidian Energy’s Interim President and CEO. “We had an active year with the expansion of a very successful capital program as well as the acquisition of the remaining interest in the Peace River Oil Partnership (“PROP“) in November 2021. Combined with higher commodity prices over the year, our reserve values and volumes increased across every category. Additionally, our low finding and development costs generated exceptional value for our capital and in combination with the quality of our asset base we replaced more than double 2021’s production with new reserves. As a result, our total proved plus probable (“2P“) reserve value increased by $621 million to approximately $1.8 billion at year-end (before tax, discounted at 10 percent).
Stephen Loukas continued, “Due to the combination of our drilling results and continued cost efficiency gains, we achieved our fifth straight year of greater than 100 percent reserve replacement on total proved (“1P“) reserves and total 2P reserves, excluding acquisitions and dispositions. With a compelling inventory of potential future drilling opportunities, we are well positioned to execute our business plan and further strengthen our balance sheet in 2022.”
HIGHLIGHTS
Our 2021 capital program was primarily focused on development in the Cardium formation, with a total of 35 wells (33.8 net) wells drilled. In the fourth quarter of 2021, we returned to the Peace River area in conjunction with our PROP acquisition, drilling four, 100 percent, Bluesky wells and participating in one Clearwater well. These capital activities, combined with higher commodity prices, had a significant impact on our reserve evaluation.
- Reserves before-tax net present value discounted at 10 percent (“NPV10“) increased over 2020 levels as follows:
- Proved developed producing (“PDP“): 54 percent increase to $1.1 billion.
- 1P: 54 percent increase to $1.4 billion.
- 2P: 52 percent increase to $1.8 billion.
- We replaced 214 percent of 2021 production on a PDP basis, 310 percent on a 1P basis and 317 percent on a 2P basis.
- Our drilling program combined with positive technical revisions generated reserves replacement of 2021 production of 125 percent for PDP, 173 percent for 1P and 187 percent for 2P, excluding the effects of acquisitions and commodity price changes from year end 2020.
- Reserve additions associated with the PROP acquisition were 4.4 mmboe, 5.3 mmboe and 7.0 mmboe for PDP, 1P and 2P, respectively.
- Our optimization capital program continued to deliver strong results for the third year in a row, successfully adding 2.8 mmboe of PDP reserves through capital expenditures of $10.1 million, providing a compelling PDP reserve addition cost of $3.58 per boe.
- Finding and development (“F&D“) costs including changes in future development capital (“FDC“) were $9.57/boe for PDP, $13.68/boe for 1P and $10.27/boe for 2P.
- Including the PROP acquisition finding, development and acquisition (“FD&A“) costs including changes in FDC were $9.07/boe (PDP), $12.87/boe (1P) and $9.62/boe (2P).
- The high profitability of our assets was demonstrated through 2021 recycle ratios of 3.4x for PDP, 2.4x for 1P and 3.2x for 2P, based on our expected 2021 operating netback of $32.75/boe and F&D costs (including changes in FDC).
- Our total undeveloped proved plus probable reserve locations remain conservatively booked and highly achievable with 231 total net locations booked (including 170 net locations in the Cardium, 26 net locations in the Bluesky and 1.5 net locations in the Clearwater) and total FDC of $736 million (approximately $147 million per year).
- Obsidian Energy maintains a strong reserve life index (“RLI“) of approximately 7.9, 11.1 and 13.4 years on a PDP, 1P, and 2P basis, respectively (2020: 8.5, 11.4 and 14.3 years, respectively).
SUMMARY OF 2021 RESERVES
Sproule conducted an independent reserves evaluation of 100 percent of our reserves effective December 31, 2021, using a four-consultant average (“IC4“) of forecast commodity prices and assumptions at December 31, 2021. This evaluation was prepared in accordance with definitions, standards, and procedures set out in the Canadian Oil and gas Evaluation Handbook and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101“). Reserves included below are company share gross reserves which are the Company’s total working interest reserves before the deduction of any royalties and excluding any royalty interests payable to the Company. The numbers in the tables below may not add due to rounding.
On November 24, 2021, Obsidian Energy closed our previously announced acquisition of the remaining 45 percent interest in the PROP. Our 2021 reserves report reflects this acquisition, which resulted in an increase in our heavy oil reserves.
Summary of Reserves1
As at December 31, 2021
Light & Medium Oil |
Heavy Oil & Bitumen |
Natural Gas Liquids |
Conventional Natural Gas |
Barrel of Oil Equivalent |
||||||||||
Reserve Category | (mmbbl) | (mmbbl) | (mmbbl) | (bcf) | (mmboe) | |||||||||
Proved | ||||||||||||||
Developed producing | 32.5 | 8.1 | 6.1 | 147.2 | 71.3 | |||||||||
Developed non-producing | 0.6 | 0.1 | 0.1 | 2.2 | 1.2 | |||||||||
Undeveloped | 22.3 | 3.0 | 3.4 | 75.0 | 41.3 | |||||||||
Total Proved | 55.4 | 11.3 | 9.6 | 224.4 | 113.7 | |||||||||
Total Probable | 14.1 | 4.5 | 3.2 | 73.1 | 34.0 | |||||||||
Total Proved plus Probable | 69.5 | 15.8 | 12.8 | 297.5 | 147.8 |
(1) Reserves are shown on a gross working interest basis.
Reserves Reconciliation – Total Proved
Light & Medium Oil |
Heavy Oil & Bitumen |
Natural Gas Liquids |
Conventional Natural Gas |
Barrel of Oil Equivalent |
||||||||||
Reconciliation Category | (mmbbl) | (mmbbl) | (mmbbl) | (bcf) | (mmboe) | |||||||||
Total Proved | ||||||||||||||
December 31, 2020 | 51.5 | 4.3 | 8.4 | 184.9 | 94.9 | |||||||||
Extensions | 0.2 | 0.2 | – | 0.3 | 0.4 | |||||||||
Infill Drilling | 2.7 | 0.8 | 1.0 | 25.7 | 8.8 | |||||||||
Improved Recovery | – | – | – | – | – | |||||||||
Technical Revisions | 1.6 | 1.8 | 0.5 | 13.7 | 6.2 | |||||||||
Discoveries | – | – | – | – | – | |||||||||
Acquisitions | 0.2 | 4.2 | – | 5.2 | 5.3 | |||||||||
Dispositions | – | – | – | – | – | |||||||||
Economic Factors | 3.1 | 1.1 | 0.5 | 14.1 | 7.1 | |||||||||
Production | (3.9) | (1.0) | (0.8) | (19.5) | (8.9) | |||||||||
December 31, 2021 | 55.4 | 11.3 | 9.6 | 224.4 | 113.7 |
Reserves Reconciliation – Total Proved Plus Probable
Light & Medium Oil |
Heavy Oil & Bitumen |
Natural Gas Liquids |
Conventional Natural Gas |
Barrel of Oil Equivalent |
||||||||||
Reconciliation Category | (mmbbl) | (mmbbl) | (mmbbl) | (bcf) | (mmboe) | |||||||||
Total Proved Plus Probable | ||||||||||||||
December 31, 2020 | 67.2 | 7.4 | 11.5 | 253.3 | 128.3 | |||||||||
Extensions | 0.4 | 0.9 | – | 0.8 | 1.4 | |||||||||
Infill Drilling | 2.8 | 0.8 | 1.3 | 33.1 | 10.5 | |||||||||
Improved Recovery | – | – | – | – | – | |||||||||
Technical Revisions | 1.1 | 1.2 | 0.3 | 12.2 | 4.6 | |||||||||
Discoveries | – | – | – | – | – | |||||||||
Acquisitions | 0.2 | 5.7 | – | 6.7 | 7.0 | |||||||||
Dispositions | – | – | – | – | – | |||||||||
Economic Factors | 1.6 | 0.9 | 0.4 | 10.8 | 4.8 | |||||||||
Production | (3.9) | (1.0) | (0.8) | (19.5) | (8.9) | |||||||||
December 31, 2021 | 69.5 | 15.8 | 12.8 | 297.5 | 147.8 |
Summary of Before Tax Net Present Values
As at December 31, 2021(1)
Net Present Values | Discount Rate | |||||||||||||
$ millions | Undiscounted | 5 Percent | 10 Percent | 15 Percent | 20 Percent | |||||||||
Proved | ||||||||||||||
Developed producing | 1,905 | 1,424 | 1,141 | 962 | 840 | |||||||||
Developed non-producing | 34 | 24 | 20 | 17 | 15 | |||||||||
Undeveloped | 908 | 486 | 282 | 169 | 101 | |||||||||
Total Proved | 2,848 | 1,935 | 1,442 | 1,148 | 955 | |||||||||
Total Probable | 1,097 | 567 | 368 | 268 | 208 | |||||||||
Total Proved plus Probable | 3,945 | 2,502 | 1,810 | 1,415 | 1,163 |
(1) The December 31, 2021 reserve net present values include only active Obsidian Energy existing well, facility, and pipeline decommissioning liability estimates, which totals $22 million NPV10 (2020 – $26 million).
Future Development Capital
As at December 31, 2021
$ millions | Total Proved | Total Proved Plus Probable |
|||
2022 | 118 | 134 | |||
2023 | 119 | 142 | |||
2024 | 135 | 149 | |||
2025 | 150 | 160 | |||
2026 | 137 | 151 | |||
2027 and subsequent | – | – | |||
Total, Undiscounted | 660 | 736 | |||
Total, Discounted @ 10% | 519 | 580 |
F&D and FD&A Costs
As at December 31, 2021
($ millions, except as noted) | Proved Developed Producing |
Total Proved | Total Proved Plus Probable |
|||||
Exploration and development capital expenditures | 140.9 | 140.9 | 140.9 | |||||
Total change in FDC | – | 165.9 | 78.0 | |||||
F&D capital, including total change in FDC | 140.9 | 306.8 | 218.9 | |||||
Reserve additions, including revisions (mmboe) | 14.7 | 22.4 | 21.3 | |||||
F&D per boe | 9.57 | 13.68 | 10.27 | |||||
F&D capital, including total change in FDC | 140.9 | 306.8 | 218.9 | |||||
Acquisitions, net of dispositions | 32.4 | 32.4 | 32.4 | |||||
Acquisitions, FDC | – | 17.7 | 21.6 | |||||
FD&A capital, including total change in FDC | 173.3 | 357.0 | 272.9 | |||||
Reserve additions, including revisions and acquisitions (mmboe) | 19.1 | 27.7 | 28.4 | |||||
FD&A per boe | 9.07 | 12.87 | 9.62 |
(1) Capital expenditures are unaudited.
F&D Costs by Year
($/boe) | 2021 | 2020 | 2019 | 3-Year Average | |||||||
F&D costs, including total change in FDC1 | |||||||||||
Proved developed producing | 9.57 | 9.41 | 10.55 | 9.85 | |||||||
Total proved | 13.68 | 3.32 | 7.34 | 9.47 | |||||||
Total proved plus probable | 10.27 | 11.19 | 4.29 | 8.72 | |||||||
FD&A costs, including total change in FDC2 | |||||||||||
Proved developed producing | 9.07 | 9.77 | 10.99 | 10.49 | |||||||
Total proved | 12.87 | 3.39 | 6.67 | 9.44 | |||||||
Total proved plus probable | 9.62 | 11.50 | 3.27 | 8.60 |
(1) The calculation of F&D includes the change in FDC and excludes the effects of acquisitions and depositions.
(2) The calculation of FD&A includes the change in FDC and includes the effects of acquisitions and dispositions.
Summary of Pricing and Inflation Rate Assumptions
As at December 31, 2021(1)
Canadian Light | Natural Gas | |||||||||||||||||||||||
WTI | Sweet Crude | AECO-C | Exchange Rate | |||||||||||||||||||||
IC4 | Cushing, Oklahoma | 40° API | Spot | |||||||||||||||||||||
Forecast(2) | ($US/bbl) | ($Cdn/bbl) | ($Cdn/mmbtu) | ($US/$Cdn) | ||||||||||||||||||||
Year | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
Forecast | ||||||||||||||||||||||||
2022 | 71.88 | 51.14 | 85.43 | 60.61 | 3.58 | 2.70 | 0.80 | 0.77 | ||||||||||||||||
2023 | 67.91 | 54.83 | 79.36 | 64.68 | 3.22 | 2.65 | 0.80 | 0.77 | ||||||||||||||||
2024 | 65.42 | 56.48 | 76.07 | 66.73 | 3.07 | 2.69 | 0.80 | 0.77 | ||||||||||||||||
2025 | 66.72 | 57.62 | 77.59 | 68.11 | 3.14 | 2.74 | 0.80 | 0.77 | ||||||||||||||||
2026 | 68.05 | 58.77 | 79.13 | 69.52 | 3.20 | 2.81 | 0.80 | 0.77 | ||||||||||||||||
2027 | 69.42 | 59.94 | 80.73 | 70.95 | 3.26 | 2.86 | 0.80 | 0.77 | ||||||||||||||||
2028 | 70.81 | 61.14 | 82.33 | 72.40 | 3.34 | 2.91 | 0.80 | 0.77 | ||||||||||||||||
2029 | 72.22 | 62.36 | 83.98 | 73.89 | 3.40 | 2.97 | 0.80 | 0.77 | ||||||||||||||||
2030 | 73.67 | 63.61 | 85.66 | 75.37 | 3.46 | 3.02 | 0.80 | 0.77 | ||||||||||||||||
2031 | 75.14 | 64.88 | 87.37 | 76.88 | 3.54 | 3.09 | 0.80 | 0.77 | ||||||||||||||||
2032 | 76.64 | 66.18 | 89.12 | 78.42 | 3.60 | 3.15 | 0.80 | 0.77 |
(1) Prices escalate at two percent after 2032, with the exception of foreign exchange which stays flat.
(2) Pricing forecasts utilized IC4 pricing (Sproule, GLJ Petroleum Consultants, McDaniel & Associates Consultants and Deloitte Resource Evaluation & Advisory).
The financial and operating information in this news release is based on estimates and is unaudited. Some of the terms below do not have standardized meanings. Further detail can be found in the “Oil and Gas Advisory” section contained in this release. Additional reserve information as required under NI 51-101 will be included in our Annual Information Form as at December 31, 2021, which will be filed on SEDAR, EDGAR, and posted to our website once we file our year-end 2021 financial documents.
FOURTH QUARTER AND FULL YEAR 2021 RESULTS RELEASE
We intend to release our fourth quarter and full year 2021 financial and operational results before North American markets open on February 24, 2022. In addition, the annual 2021 management’s discussion and analysis and the audited 2021 consolidated financial statements will be available on our website at www.obsidianenergy.com, on SEDAR at www.sedar.com, and on EDGAR at www.sec.gov on or about the same date.
ADDITIONAL READER ADVISORIES
OIL AND GAS INFORMATION ADVISORY
This news release contains a number of oil and gas metrics, including “F&D costs”, “FD&A costs”, “Operating netback”, “Recycle Ratio” and “RLI” which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies. Such metrics are commonly used in the oil and gas industry and have been included herein to provide readers with additional measures to evaluate the Company’s performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods.
F&D costs are the sum of capital expenditures incurred in the period, plus the change in estimated future development capital for the reserves category, all divided by the change in reserves during the period. F&D costs exclude the impact of acquisitions and divestitures.
FD&A costs are the sum of capital expenditures incurred in the period for the reserves category and including the impact of acquisition and disposition activity, all divided by the change in reserves during the period.
Operating netback is the per unit of production amount of revenue less royalties, net operating expenses and transportation expenses.
Recycle Ratio is calculated by dividing the operating netback by the F&D costs for the year. The recycle ratio compares netback from existing reserves to the cost of finding new reserves and may not accurately indicate the investment success unless the replacement reserves are of equivalent quality as the produced reserves.
RLI is calculated as total Company gross reserves divided by Sproule’s forecasted 2022 production for the associated reserve category.
Under NI 51-101, proved reserves estimates are defined as having a high degree of certainty to be recoverable with a targeted 90 percent probability in aggregate that actual reserves recovered over time will equal or exceed proved reserve estimates. For proved plus probable reserves under NI 51-101, the targeted probability is an equal (50 percent) likelihood that the actual reserves to be recovered will be greater or less than the proved plus probable reserve estimate. The reserve estimates set forth above 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.
Barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value. Boe/d means barrels of oil equivalent per day.
ABBREVIATIONS
Oil | Natural Gas | |||
bbl | barrel or barrels | mcf | thousand cubic feet | |
mmbbl | million barrels | mmcf | million cubic feet | |
boe | barrel of oil equivalent | bcf | billion cubic feet | |
mmboe | million barrels of oil equivalent | mcf/d | thousand cubic feet per day | |
WTI | West Texas Intermediate | mmcf/d | million cubic feet per day | |
mmbtu | million British thermal units | |||
AECO | Alberta benchmark price for natural gas | |||
API | American Petroleum Institute | |||
*API | The measure of the density of gravity of liquid petroleum products derived from a specific gravity |