CALGARY, Alberta, Feb. 09, 2023 (GLOBE NEWSWIRE) — Crew Energy Inc. (TSX: CR; OTCQB: CWEGF) (“Crew” or the “Company”), a growth-oriented natural gas weighted producer operating in the world-class Montney play in northeast British Columbia (“NE BC”), is pleased to provide highlights from our year-end independent corporate reserves evaluation prepared by Sproule Associates Ltd. (“Sproule”) with an effective date of December 31, 2022 (the “Sproule Report”), along with an operations update.
The Company’s two-year plan concluded at the end of 2022, and the successful execution of this plan is demonstrated by our year-end 2022 reserves. The updated reserves reflect strong additions to Proved Developed Producing (“PDP”) reserves along with meaningful increases in production levels, adjusted funds flow1 (“AFF”) and free AFF2 which were directed to debt repayment, resulting in significantly improved leverage metrics exiting 2022. Looking forward, Crew plans to build on this momentum by continuing to grow PDP reserves while harvesting the Company’s Total Proved (”1P”) reserves and Total Proved Plus Probable (“2P”) reserves, as we have consistently done since 2014. Expanding our 1P and 2P reserves beyond current levels will require additional infrastructure which is planned with the addition of a new gas plant at Groundbirch, the timing and sanctioning of which will be dependent on supportive natural gas prices and other factors as outlined in our corporate presentation. Crew’s primary goal over the past two years has been realized with debt being reduced materially, placing the Company in a strong financial position. Our primary focus will continue to be maintaining balance sheet strength while unlocking the inherent value of our vast resource.
Crew’s 2022 reserves evaluation reflects the addition of 18.7 million boe of PDP reserves to total 88.6 million boe, representing an 8% increase year-over-year and a 27% increase when including the replacement of 2022 production volumes of 12.1 million boe. Crew also materially increased the before tax net present value discounted at 10% (“NPV10”) of our year-end 2022 PDP reserves by 46% to $985 million. The Company’s Q4/22 average production increased to 32,893 boe per day3, above guidance of 30,000 to 32,000 boe per day and an increase of 13% over the 29,142 boe per day3 in Q4/21, while reducing net debt1 by 63% over year-end 2021 to $150 million at year-end 20224.
2022 RESERVES HIGHLIGHTS
Highlights of our PDP,1P and 2P reserves from the Sproule Report are provided below. All finding, development and acquisition (“FD&A”)5,6 costs and finding and development (“F&D”)5,6 costs below include changes in future development capital6 (“FDC”) unless otherwise noted.
- Significant PDP Additions: Crew added 18.7 million boe of PDP reserves in 2022 to total 88.6 million boe, marking a record high for the Company and a 32% increase since commencing the two-year plan in January 2021. The additions were achieved with PDP F&D costs5,6 of $9.28 per boe and PDP FD&A costs5,6 of $2.34 per boe in 2022, resulting in recycle ratios5,6 of 3.5 and 14.0 times, respectively.
- Materially Higher Before Tax NPV: Crew’s before tax NPV10 for year-end 2022 PDP reserves increased 46% to $985 million ($5.33 debt adjusted per share including $150 million of year-end net debt1,4, and before any value attributed to undeveloped reserves) compared to 2021 due to improved pricing and higher production. 1P and 2P before tax NPV10 increased 46% and 36% to $1.9 billion ($11.17 debt adjusted per share) and $3.0 billion ($18.19 debt adjusted per share) compared to year-end 2021, respectively, largely due to improved pricing, extensions on recent drilling, and enhanced capital efficiencies in the undeveloped reserve categories primarily as a result of increased well lengths.
- 1P and 2P Increased: Crew’s 1P and 2P reserves increased year-over-year to 210.9 mmboe and 374.0 mmboe, respectively, after taking into account the divestiture of Crew’s Attachie property in Q3/22. Throughout Crew’s two-year plan, the Company delineated new areas at Groundbirch South and Septimus North, and commenced new development in existing areas of Greater Septimus in the Upper Montney ‘C’ zone to position for additional development in the future. These new areas position Crew for longer term 1P and 2P reserve growth as additional facility capacity is established.
- Excellent Recycle Ratios5,6,7 on 1P and 2P FD&A Costs: 1P and 2P FD&A5,6 costs in 2022 were $8.45 per boe and $3.85 per boe, respectively, generating recycle ratios of 3.9 times for 1P FD&A5,6 and 8.5 times for 2P FD&A5,6. These results were boosted by the successful divestiture of Crew’s Attachie property which yielded gross proceeds of $130 million and, as of the Company’s year-end 2021 reserves report, included associated 1P and 2P reserves of 4.7 mmboe and 34.2 mmboe, respectively, as well as FDC of $25.7 million and $182.9 million, respectively.
|2022 F&D and FD&A Costs5,6|
- 1P and 2P F&D5,6 Costs: Crew’s 2022 1P and 2P F&D costs5,6 were $13.97 per boe and $15.35 per boe, respectively. These results are largely attributable to our successful capital program execution in 2022, notwithstanding the substantial inflation in goods and services experienced during the year.
- Debt Adjusted Per Share Reserves Growth: Year-over-year PDP, 1P and 2P growth per share on a debt adjusted basis was 32%, 25% and 13%, respectively8.
* Information derived from the Company’s year-ended independent reserves evaluations.
2022 RESERVES DETAIL
The detailed reserves data set forth below is based upon the Sproule Report with an effective date of December 31, 2022. 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, 2022 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, 2022, which will be filed on the Company’s profile at www.sedar.com on or before March 31, 2023.
See “Information Regarding Disclosure on Oil and Gas Reserves and Operational Information” for additional cautionary language, explanations and discussion and “Forward Looking Information and Statements” for principal assumptions and risks that may apply.
|Light & Medium
|Total Proved plus Probable||8,158||69,061||1,780,795||374,018|
The estimated before tax net present value (“NPV”) of future net revenues associated with Crew’s reserves effective December 31, 2022, and based on the Sproule Report and the published Sproule (December 31, 2022) future price forecast, are summarized in the following table:
|Total Proved plus Probable||8,119,998||4,556,329||3,034,436||2,237,135||1,759,649|
The Sproule December 31, 2022 price forecast is summarized as follows:
|Henry Hub||Natural gas at
The following reconciliation of Crew’s gross reserves compares changes in the Company’s reserves as at December 31, 2022, based on the Sproule (December 31, 2022) future price forecast relative to the reserves as at December 31, 2021.
|FACTORS||Total Proved||Total Probable||Total Proved + Probable|
|December 31, 2021||206,807||197,878||404,684|
|Extensions and Improved Recovery19||21,211||(3,300)||17,911|
|December 31, 2022||210,882||163,136||374,018|
Corporate level technical revisions on a boe basis were -2% at the Proved level and -1% at the Proved plus Probable level. Technical revisions were primarily due to operating cost increases, high-grading future development bookings in context of COGE Handbook recommended development timing windows, performance adjustments attributable to the Company’s 2022 capital program, well performance and type curve changes, and reserves reclassifications. Other technical revisions were attributable to the Company’s updated development planning resulting in adjustments to future development bookings, reflective of a continuing shift towards extended reach horizontal well designs.
Material changes in other categories were attributable to divestment of the Company’s Attachie and Portage assets in Q3/22, pricing, carbon tax, and royalty regime changes, and infill and extension additions associated with Crew’s 2022 development activity.
Capital Program Efficiency – Including FDC
|Exploration and Development Expenditures20,21($ thousands)||$176,637||$176,637||$176,637|
|Change in Future Development Capital6,20($ thousands)|
|– Exploration and Development||($3,112)||$115,883||$64,744|
|Reserves Additions with Revisions and Economic Factors (mboe)|
|– Exploration and Development||18,689||20,934||15,728|
|Finding & Development Costs6,22,23($ per boe)|
|– with revisions and economic factors||$9.28||$13.97||$15.35|
|Finding, Development & Acquisition Costs6,22,23($ per boe)|
|– with revisions and economic factors||$2.34||$8.45||$3.85|
Production Exceeds Forecasts
Full year 2022 production exceeded forecasts to average 33,277 boe per day3, and Q4/22 production surpassed guidance of 30,000 to 32,000 boe per day to average 32,893 boe per day3. This strong performance was largely due to the continued strength of the 4-17 Groundbirch wells and the 4-14 ultra-condensate rich (“UCR”) wells at Septimus, combined with the encouraging performance of our new wells at the 11-27 pad noted below.
Strong Condensate-Rich Wells at Greater Septimus
Five (5.0 net) extended reach horizontal UCR wells were completed on the 11-27 pad in December 2022. Prior to shutting in for tubing installation, four of the wells averaged raw initial production rates of 1.7 mmcf per day of natural gas and 1,000 bbls per day of condensate after an average of 19 days flowing. The fifth well is currently flowing back on cleanup at 2.3 mmcf per day of natural gas and 1,005 bbls per day of condensate over the last three days. (BOE Report edit: see these wells in the public domain on Petro Ninja here)
Agreement Reached Between B.C. Government and Blueberry River First Nations
On January 18, 2023, the B.C. Government and Blueberry River First Nations (“BRFN”) announced the ‘BRFN Implementation Agreement’ in response to a B.C. Supreme Court decision issued on June 29, 2021. Following this, on January 20, 2023, the province announced a Consensus Agreement with four Treaty 8 First Nations. Collectively, these agreements outline a collaborative approach to land and resource planning while protecting treaty rights. Having this framework in place is expected to provide stability and predictability for industry operating within NE BC. While some uncertainty is anticipated to persist until details are confirmed, the partnership framework provides guidance related to land, water and resource stewardship.
As a result of this positive development, Crew is optimistic about the path forward and our ability to execute an active drilling and completions program with the ability to make optimal capital allocation decisions across our asset base. The Company has submitted additional permit applications for approval, which include 93 well locations, the planned Groundbirch Plant, gathering lines, facilities, and other ancillary operations.