With many companies having now released their 2023 reserves announcements, we wanted to examine the Canadian producers showing the most movement. While changes in reserves are largely attributable to adjustments in commodity pricing expectations (reserves are, after all, based on hydrocarbon resources that are deemed “economic”), we’ve also seen numerous producers making significant acquisitions this past year. Perhaps more interesting, however, are the handful of producers who have delivered substantial reserve increases without making any acquisitions at all. We’ve summarized a number of noteworthy reserves developments to give our readers a quick snapshot on a sometimes overlooked part of the industry.
With respect to percentage change in 2023, Saturn Oil saw the most impressive reserve boost of any company in our dataset. The company’s 2P reserves increased from 62.86 MMBOE to 145.311 MMBOE (131.18%). This is largely a result of the company’s acquisition of Ridgeback Resources, which closed in January 2023. In its announcement of the closure of this transaction, Saturn indicated that the acquisition would add 99.4 MMBOE in 2P reserves. The company’s year-end 2023 reconciliation suggests the company acquired 94.3 MMBOE through acquisitions in 2023, vastly exceeding the company’s reserve reductions through technical revisions (5.31 MMBOE) and production (8.80 MMBOE). The company issued new shares in order to finance its acquisition program, but it appears to have been matched proportionally by the newly-acquired reserves: Saturn’s 2P BOE/Share ratio remained the same at around 1.04. After a large acquisition at the beginning of 2023, the company’s capital priorities suggest a shift towards accelerated debt repayment in 2024.
Headwater Exploration also substantially expanded its reserves last year, growing its 2P reserves by 17.63 MMBOE (51.4%). Almost all of the company’s growth was due to extensions and improved recovery (70.2%) and technical revisions (7.2%). This also significantly boosted Headwater’s 2P BOE/Share ratio, which rose from 0.15 to 0.22. A noteworthy comment from Headwater’s 2023 Annual Information Form: “The Corporation plans to develop all of its proved and probable undeveloped reserves within three years”, although it’s also stated that Headwater will continue to re-evaluate its various asset groups (such as Greater Peavine, West Nipisi and Marten Hills) with respect to their relative economic potential.
Strathcona made waves with its acquisition of Pipestone last year, and its reserves increased in kind; its year end 2023 reserves exceeded the prior year’s by 10.6%. With that said, the companies 2P reserves didn’t just grow through acquisitions. The company grew its 2P reserves by 29.59 MMBOE (1.2%) through technical revisions and 81.58 MMBOE (3.4%) through extensions and improved recovery. In contrast to most other producers in our dataset, Strathcona’s 2023 reserves announcement provided previously unknown details regarding its historical reserves. In its shareholders’ note regarding its 2023 reserves report, the company provided a reserves reconciliation covering years 2016-2023. One notable finding of inspecting this reconciliation: this year represents Strathcona’s fifth consecutive year where organic reserve additions outpaced reductions due to production, consistency that has contributed to Strathcona’s impressive 2P reserve life index (38 years).
Crew Energy was another company that recorded a noteworthy expansion in its reserves without any acquisitions. The company added 99.181 MMBOE in 2P reserves, a 26.5% increase. Almost all of this increase was related to extensions and improved recovery. While Crew did see a slight increase in shares outstanding in 2023 (likely related to share-based compensation issuances), this was not enough to dilute its 2P BOE/Share ratio; 2023’s 3.02 eclipses the prior year’s figure (2.45). According to a February press release from the company, Crew’s boost in reserves was realized after the company “incorporated the addition of 56 locations in the Groundbirch area” to fill its new Groundbirch Plant to capacity by 2027. The company’s most recent corporate presentation also indicated that the company is pursuing a surface acquisition program targeting future Groundbirch development, something that is worth tracking in the year ahead.
Source: Crew Corporate Presentation
As a final exercise, we wanted to take a look at Tourmaline. A model of consistent growth, Tourmaline grew its reserves by 11.3% in 2023, reaching 2P reserves of 5,008 MMBOE at the year’s end. The change was even more impressive in its PDP reserves, which grew by an impressive 20.3%. In the company’s year-end announcement, Tourmaline indicated that its 2023 “organic EP program had an increased emphasis on conversions to PDP rather than 2P reserve growth when compared to previous years.” It’s also important to remember its acquisition of Bonavista, which came with 459 MMBOE in 2P reserves. Through both this acquisition and a combined total of 214,860 MMBOE in growth from technical revisions and extensions and improved recovery, the company’s 2P BOE/Share ratio improved from 13.29 to 14.25.
While companies generally only announce their reserves assessments once a year, there are endless performance indicators to track. To stay on top of all of the latest developments, check out BOE Intel and Petro Ninja.