CALGARY, Alberta – Razor Energy Corp. (“Razor” or the “Company”) (TSXV: RZE) is pleased to provide a summary of its 2021 year-end reserves evaluation and an updated operational outlook.
The highlights and reserves summary below set forth Razor’s gross reserves at December 31, 2021, as evaluated by Sproule Associates Limited (“Sproule”), qualified reserves evaluators, in an independent report dated February 17, 2022 (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 is anticipated to be filed on SEDAR on or before March 31, 2022.
Razor’s 2021 annual audited consolidated financial statements have not been completed. Certain financial and operating information included in this news release is 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
Razor experienced significant year-over-year reserves volume and value growth. The increases are primarily attributable to the acquisition of additional working interest in the Company’s existing non-operated position in Swan Hills Unit No. 1 announced August 12, 2021. This acquisition augmented holdings in the greater Swan Hills area which exhibit low decline, light oil production. Other primary factors which positively affected reserve volume and values included the reinvigoration of operated and non-operated well and pipeline reactivations and improving West Texas Intermediate (“WTI”) oil price throughout 2021.
Summary of Year over Year Reserves at December 31, 2021(1)
Before Tax NPV10% | Reserves Volumes | |||||||||
Reserves Class | 2021 | 2020 | Change | 2021 | 2020 | Change | ||||
(MM$) | (MM$) | (%) | (Mboe) | (Mboe) | (%) | |||||
Proved | ||||||||||
Developed Producing | $89.1 | $26.6 | 236 | % | 9,768 | 7,416 | 32 | % | ||
Developed Non-Producing | $68.0 | $49.2 | 38 | % | 4,704 | 4,468 | 5 | % | ||
Undeveloped | $36.3 | $19.8 | 83 | % | 1,721 | 1,641 | 5 | % | ||
Total Proved | $193.4 | $95.5 | 103 | % | 16,192 | 13,525 | 20 | % | ||
Total Probable | $60.3 | $37.7 | 60 | % | 4,892 | 3,793 | 29 | % | ||
Total Proved plus Probable | $253.7 | $133.2 | 90 | % | 21,085 | 17,319 | 22 | % |
Notes:
(1) This table summarizes the data contained in the Sproule Report and as a result may contain slightly different numbers due to rounding.
The Company continues to maintain considerable exposure to WTI oil price.
Razor’s Proved Developed reserve base, defined as Proved Developed Producing (“PDP”) plus Proved Developed Non-Producing (“PDNP”), has before tax NPV10 of $157.1 million from a volume of 14,472MBoe and is comprised of 67% light 410 API oil, 6% medium 250 API oil, 20% natural gas liquids and 7% natural gas. On a cumulative basis, this equates to 93% oil and liquids. Future Development Capital of $10.0 million is required to reactivate the PDNP, or “behind-pipe” production and reserves, in existing wells and convert them to PDP reserves.
Razor’s corporate annual base decline remains at 11%.
The Company’s Reserve Life Index1 is 6.2 years for PDP, 12.2 years for Total Proved and 13.4 years for Total Proved plus Probable reserves based on 2021 Q4 field-reported production of 4,307 boepd.
The Greater Swan Hills Area accounts for 68% of Razor’s PDP reserves with the greater Kaybob and South District areas at 21% and 11% respectively.
2021 INDEPENDENT RESERVES EVALUATION
Sproule carried out an independent reserves evaluation effective December 31, 2021, which was prepared in accordance with definitions, standards and procedures contained in the COGEH and in NI 51-101. The reserves evaluation was based on Sproule forecast pricing and foreign exchange rates at December 31, 2021 as outlined herein.
Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without the inclusion of any royalty interest) unless otherwise noted.
RESERVES SUMMARY
Summary of Gross Oil and Gas Reserves at December 31, 2021(1), (2), (3), (4)
Light and Medium Crude Oil |
Heavy Crude Oil | Conventional Natural Gas |
Natural Gas Liquids |
Barrels of Oil Equivalent |
|
Gross | Gross | Gross | Gross | Gross | |
(Mbbl) | (Mbbl) | (MMcf) | (Mbbl) | (Mboe) | |
Proved | |||||
Developed Producing | 6,929 | 240 | 5,552 | 1,674 | 9,768 |
Developed Non-Producing | 3,205 | 169 | 973 | 1,168 | 4,704 |
Undeveloped | 1,315 | 223 | 657 | 74 | 1,721 |
Total Proved | 11,449 | 631 | 7,182 | 2,915 | 16,193 |
Probable | 3,490 | 173 | 1,820 | 926 | 4,892 |
Total Proved plus Probable | 14,939 | 804 | 9,002 | 3,841 | 21,085 |
Net Present Value of Future Net Revenue Before Income Taxes Discounted at (% per Year) (M$)
0 | % | 5 | % | 10 | % | 15 | % | 20 | % | |
Proved | ||||||||||
Developed Producing | -52,926 | 76,301 | 89,144 | 84,622 | 78,025 | |||||
Developed Non-Producing | 119,270 | 87,807 | 67,995 | 54,650 | 45,177 | |||||
Undeveloped | 52,990 | 43,732 | 36,273 | 30,272 | 25,401 | |||||
Total Proved | 119,334 | 207,841 | 193,413 | 169,544 | 148,603 | |||||
Probable | 142,085 | 87,780 | 60,273 | 44,350 | 34,198 | |||||
Total Proved plus Probable | 261,419 | 295,621 | 253,686 | 213,894 | 182,801 |
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, 2021 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)
1 “Reserve Life Index” does not have standardized meaning. See “Reader Advisories – Oil and Gas Metrics” contained in this news release.
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, 2020 | 4,940 | 9,009 | 11,647 | 193 | 587 | 731 | ||||||
Acquisitions | 1,631 | 1,958 | 3,649 | – | – | – | ||||||
Category Change | – | – | – | – | – | – | ||||||
Disposition | – | – | – | – | – | – | ||||||
Extensions/Infill Drilling | – | – | – | – | – | – | ||||||
Economic Factors | 869 | 1,924 | 1,941 | 23 | 34 | 43 | ||||||
Technical Revision | 245 | (686 | ) | (1,542 | ) | 82 | 68 | 88 | ||||
Production | (756 | ) | (756 | ) | (756 | ) | (58 | ) | (58 | ) | (58 | ) |
December 31, 2021 | 6,929 | 11,449 | 14,939 | 240 | 631 | 804 |
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, 2020 | 1,595 | 3,036 | 3,819 | 4,126 | 5,355 | 6,732 | ||||||
Acquisitions | 832 | 980 | 1,742 | 1,035 | 1,216 | 2,152 | ||||||
Category Change | – | – | – | – | – | – | ||||||
Disposition | – | – | – | – | – | – | ||||||
Extensions/Infill Drilling | – | – | – | – | – | – | ||||||
Economic Factors | 177 | 310 | 458 | 1,111 | 1,219 | 1,484 | ||||||
Technical Revision | (733 | ) | (1,214 | ) | (1,981 | ) | 645 | 758 | 0 | |||
Production | (197 | ) | (197 | ) | (197 | ) | (855 | ) | (855 | ) | (855 | ) |
December 31, 2021 | 1,674 | 2,915 | 3,841 | 5,552 | 7,183 | 9,003 |
Barrels of Oil Equivalent |
Factors | Gross Proved Developed Producing (Mboe) |
Gross Proved (Mboe) |
Gross Proved + Probable (Mboe) |
|||
December 31, 2020 | 7,416 | 13,525 | 17,319 | |||
Acquisitions | 2,635 | 3,140 | 5,750 | |||
Category Change | – | – | – | |||
Disposition | – | – | – | |||
Extensions/Infill Drilling | – | – | – | |||
Economic Factors | 1,253 | 2,470 | 2,689 | |||
Technical Revision | (297 | ) | (1,703 | ) | (3,434 | ) |
Production | (1,239 | ) | (1,239 | ) | (1,239 | ) |
December 31, 2021 | 9,768 | 16,193 | 21,085 |
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 |
2022 | 34,272 | 50,700 |
2023 | 10,546 | 10,647 |
2024 | 0 | 0 |
Thereafter | 2,550 | 2,550 |
Total Undiscounted | 47,368 | 63,897 |
Total Discounted at 10% | 43,966 | 60,139 |
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 PDP reserves. The undiscounted future development costs are $47.4 million for proved reserves and $63.9 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, 2021 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) |
2022 | 0.80 | 73.00 | 86.25 | 69.58 | 3.88 |
2023 | 0.80 | 70.00 | 82.40 | 65.84 | 3.36 |
2024 | 0.80 | 68.00 | 79.80 | 63.24 | 3.02 |
2025 | 0.80 | 69.36 | 81.39 | 64.51 | 3.08 |
2026 | 0.80 | 70.75 | 83.02 | 65.80 | 3.14 |
2027 | 0.80 | 72.16 | 84.68 | 67.12 | 3.21 |
2028 | 0.80 | 73.61 | 86.38 | 68.46 | 3.27 |
2029 | 0.80 | 75.08 | 88.10 | 69.83 | 3.34 |
2030+ | 0.80 | +2.0%/yr. | +2.0%/yr. | +2.0%/yr. | +2.0%/yr. |
OPERATIONAL OUTLOOK
Razor continues to progress its reactivation program which commenced in Q1 2021. The Company anticipates bringing 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.
Concurrently, Razor’s subsidiary company, FutEra Power Corp. (“FutEra”), continues to advance construction of its 21 megawatt co-produced geothermal and natural gas hybrid power project in Swan Hills. FutEra anticipates delivering power to the grid by the third quarter of 2022.
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 active subsidiaries – 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