Calgary, Alberta – OBSIDIAN ENERGY LTD. (TSX: OBE) (OTCQX: OBELF) (“Obsidian Energy“, the “Company“, “we“, “us” or “our“) is pleased to announce its independent reserves evaluation for the year ended December 31, 2020, prepared by Sproule Associates Limited (“Sproule“).
“We’re extremely pleased with our reserves results in 2020,” said Stephen Loukas, Obsidian Energy’s Interim President and CEO. “It was a challenging year with extreme oil price volatility impacting all aspects of our business. Despite this environment, our team continued to deliver strong results by drilling some of the most prolific wells in the Cardium that the Company has seen to date. Due to a combination of our deep Cardium inventory and continued cost efficiency gains, we achieved our fourth straight year of greater than 100 percent reserve replacement on total proved reserves and total proved plus probable reserves despite the significantly lower commodity price environment.”
HIGHLIGHTS
- On a corporate basis, we replaced 64% of 2020 production (prior to asset divestitures) on a proved developed producing (“PDP“) basis, 113% on a total proved reserves (“1P“) basis and 125% on a total proved plus probable reserves (“2P“) basis, inclusive of commodity price impact.
- The Company achieved a 96% PDP replacement of 2020 production on a comparable commodity price basis to our year-end 2019 results, notwithstanding Obsidian Energy’s decision to defer adding new PDP reserves and production from additional drilling in the second half of 2020. The Company carefully managed our capital expenditures during 2020 in response to the volatile commodity price environment, reducing our drilling program by approximately half from 2019 levels, and, as a result, our corresponding new well PDP additions. This PDP performance demonstrates the strength of our underlying asset base and compelling go-forward opportunity set as oil prices continue their recovery.
- Reserve replacement was driven by strong underlying asset base performance and the 2020 Cardium drilling program in Willesden Green. Cardium replacement was approximately 149% and 164% on a 1P and 2P basis, respectively. Our Cardium assets account for 90% of the Company’s undeveloped reserves.
- Our optimization capital program continued to deliver strong results and successfully added 1.6 mmboe of PDP reserves with capital expenditures of $8.5 million resulting in a compelling PDP reserve addition cost of $5.31 per boe.
- On a 2P basis, development costs for our operated capital activity in 2020 were $9.44 per boe.
- Finding and development (“F&D“) costs excluding changes in future development capital (“FDC“) were $4.97 per boe, and F&D including changes in FDC were $10.29 per boe.
- Our total undeveloped reserve locations remain conservatively booked and highly achievable with 213 total net locations booked (including 172 net locations in the Cardium) and total FDC of $636 million (approximately $127 million per year).
- This is an increase of 18 percent over total net locations and 27 percent in Cardium locations booked in 2019 (180 and 135 net locations, respectively).
- Obsidian Energy’s corporate reserve life index (“RLI“) is approximately 8.5, 11.4 and 14.3 years on a PDP, 1P, and 2P basis, respectively (2019: 8.1, 10.7 and 13.8 years, respectively).
- Before-tax net present value discounted at 10 percent (“NPV10“) for 2P decreased by 26 percent, or $483 million, to $1.2 billion at December 31, 2020. This change is driven by materially lower oil commodity price forecasts at December 31, 2020 compared to 2019.
SUMMARY OF 2020 RESERVES
Sproule conducted an independent reserves evaluation of 100 percent of our reserves effective December 31, 2020 using a four-consultant average (“IC4“) of forecast commodity prices and assumptions at December 31, 2020. This evaluation was prepared in accordance with definitions, standards, and procedures set out in COGEH 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.
Summary of Reserves
As at December 31, 2020
Light & Medium Crude Oil |
Heavy Crude Oil & Bitumen |
Natural Gas Liquids |
Conventional Natural Gas |
Barrel of Oil Equivalent |
|
Reserve Category | (mmbbl) | (mmbbl) | (mmbbl) | (bcf) | (mmboe) |
Proved | |||||
Developed producing | 31 | 3 | 6 | 127 | 61 |
Developed non-producing | 0 | 0 | 0 | 3 | 1 |
Undeveloped | 20 | 1 | 3 | 56 | 33 |
Total Proved | 51 | 4 | 8 | 185 | 95 |
Total Probable | 16 | 3 | 3 | 68 | 33 |
Total Proved plus Probable | 67 | 7 | 12 | 253 | 128 |
Reserves Reconciliation – Total Proved
Light & Medium Crude Oil |
Heavy Crude Oil & Bitumen |
Natural Gas Liquids |
Conventional Natural Gas |
Barrel of Oil Equivalent |
|
Reconciliation Category | (mmbbl) | (mmbbl) | (mmbbl) | (bcf) | (mmboe) |
Proved | |||||
December 31, 2019 | 51 | 6 | 8 | 173 | 94 |
Extensions | 0 | 0 | 0 | 0 | 0 |
Infill Drilling | 3 | 0 | 0 | 8 | 5 |
Improved Recovery | 0 | 0 | 0 | 0 | 0 |
Technical Revisions | 4 | 0 | 1 | 31 | 10 |
Discoveries | 0 | 0 | 0 | 0 | 0 |
Acquisitions | 0 | 0 | 0 | 0 | 0 |
Dispositions | (0) | 0 | (0) | (0) | (0) |
Economic Factors | (2) | (1) | (0) | (8) | (5) |
Production | (4) | (1) | (1) | (19) | (9) |
December 31, 2020 | 51 | 4 | 8 | 185 | 95 |
Reserves Reconciliation – Proved Plus Probable
Light & Medium Crude Oil |
Heavy Crude 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, 2019 | 67 | 9 | 11 | 236 | 126 |
Extensions | 0 | 0 | 0 | 0 | 0 |
Infill Drilling | 6 | 0 | 1 | 18 | 10 |
Improved Recovery | 0 | 0 | 0 | 0 | 0 |
Technical Revisions | 0 | (0) | 1 | 27 | 5 |
Discoveries | 0 | 0 | 0 | 0 | 0 |
Acquisitions | 0 | 0 | 0 | 0 | 0 |
Dispositions | (0) | 0 | (0) | (0) | (0) |
Economic Factors | (2) | (1) | (0) | (8) | (4) |
Production | (4) | (1) | (1) | (19) | (9) |
December 31, 2020 | 67 | 7 | 12 | 253 | 128 |
Summary of Before Tax Net Present Values
As at December 31, 2020(1)
Net Present Values | Discount Rate | |||||
$ millions | Undiscounted | 5 Percent | 10 Percent | 15 Percent | 20 Percent | |
Proved | ||||||
Developed producing | 890 | 931 | 743 | 613 | 525 | |
Developed non-producing | 20 | 15 | 12 | 10 | 9 | |
Undeveloped | 642 | 335 | 183 | 100 | 49 | |
Total Proved | 1,552 | 1,282 | 938 | 723 | 583 | |
Total Probable | 854 | 415 | 251 | 170 | 124 | |
Total Proved plus Probable | 2,406 | 1,697 | 1,189 | 894 | 707 | |
(1) The December 31, 2020 reserve net present values include only active Obsidian Energy existing well, facility, and pipeline decommissioning liability estimates, which totals $26 million NPV10. The December 31, 2019 net present value incorporated all well, pipelines, and facility decommissioning liability estimates, totaling $61 million NPV10. |
Future Development Capital
As at December 31, 2020
$ millions | Total Proved | Total Proved Plus Probable |
2021 | 98 | 120 |
2022 | 85 | 113 |
2023 | 95 | 124 |
2024 | 111 | 128 |
2025 | 87 | 151 |
2026 and subsequent | 0 | 0 |
Total, Undiscounted | 476 | 636 |
Total, Discounted @ 10% | 380 | 502 |
Summary of Pricing and Inflation Rate Assumptions
As at December 31, 2020(1)
Canadian Light | Natural Gas | ||||||||
WTI | Sweet Crude | AECO-C | Exchange Rate | ||||||
Sproule | Cushing, Oklahoma | 40° API | Spot | ||||||
Forecast | ($US/bbl) | ($Cdn/bbl) | ($Cdn/mmbtu) | ($US/$Cdn) | |||||
Year | 2020 | 2019(2) | 2020 | 2019(2) | 2020 | 2019(2) | 2020 | 2019(2) | |
Forecast | |||||||||
2021 | 46.88 | 65.00 | 55.13 | 78.51 | 2.74 | 2.27 | 0.77 | 0.77 | |
2022 | 51.14 | 67.00 | 60.61 | 78.73 | 2.70 | 2.81 | 0.77 | 0.80 | |
2023 | 54.83 | 68.34 | 64.68 | 80.30 | 2.65 | 2.89 | 0.77 | 0.80 | |
2024 | 56.48 | 69.71 | 66.73 | 81.91 | 2.69 | 2.98 | 0.77 | 0.80 | |
2025 | 57.62 | 71.10 | 68.11 | 83.54 | 2.74 | 3.06 | 0.77 | 0.80 | |
2026 | 58.77 | 72.52 | 69.52 | 85.21 | 2.81 | 3.15 | 0.77 | 0.80 | |
2027 | 59.94 | 73.97 | 70.95 | 86.92 | 2.86 | 3.24 | 0.77 | 0.80 | |
2028 | 61.14 | 75.45 | 72.40 | 88.66 | 2.91 | 3.33 | 0.77 | 0.80 | |
2029 | 62.36 | 76.96 | 73.89 | 90.43 | 2.97 | 3.42 | 0.77 | 0.80 | |
2030 | 63.61 | 78.50 | 75.37 | 92.24 | 3.02 | 3.51 | 0.77 | 0.80 | |
(1) Prices escalate at two percent after 2030, with the exception of foreign exchange which stays flat. (2) 2019 pricing forecasts used Sproule only estimates; 2020 utilized IC4 pricing (Sproule, GLJ Petroleum Consultants, McDaniel & Associates Consultants and Deloitte Resource Evaluation & Advisory). |
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The financial and operating information in this press 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, 2020, which will be filed on SEDAR, EDGAR, and posted to our website in March.
ADDITIONAL READER ADVISORIES
OIL AND GAS INFORMATION ADVISORY
This press release contains a number of oil and gas metrics, including “F&D costs”, 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 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 exploration and development costs 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. RLI is calculated as total Company gross reserves divided by Sproule’s forecasted 2020 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 |