CALGARY, ALBERTA--(Marketwire - Feb. 26, 2013) - Chinook Energy Inc. ("Chinook" or the "Company") (TSX:CKE) today announced the results of its year-end reserve evaluations effective December 31, 2012 as prepared by its independent evaluators. The Company has also provided certain unaudited year-end financial information and an operations update.
Chinook's audit of its 2012 annual consolidated financial statements is not yet complete and accordingly all financial amounts referred to in this news release are unaudited and represent management's estimates. Readers are advised that these financial estimates are subject to audit and may be subject to change as a result.
2012 Reserves Highlights
Two evaluators, which were largely responsible for the previous evaluations of the same assets, have evaluated all of Chinook's crude oil, NGL and natural gas reserves in accordance with National Instrument 51-101. Chinook's Reserves, Safety and Environmental Committee and Board of Directors have reviewed and approved the evaluations prepared by the evaluators. Highlights of such evaluations are as follows:
- Proved reserves totaled 28.95 million barrels of oil equivalent. The proved reserve life index ("RLI") is 7.1 years using annualized December 2012 production.
- Proved plus probable reserves totaled 51.65 million barrels of oil equivalent. The proved plus probable RLI is 12.7 years using annualized December 2012 production.
- Proved plus probable reserves are down 7.5% from 2011. Assets representing 11.7% of the 2011 reserves were sold during the year and Economic Factors and Technical Revisions represented a 0.6% increase from 2011 reserve levels.
- The proved finding and development cost, as per NI 51-101 requirements, was $39.27 per barrel of oil equivalent and the proved plus probable finding and development cost, as per NI 51-101 requirements, was $40.19 per barrel of oil equivalent. The change in future development costs ("FDC") and revisions was included in the calculation and the effect of acquisitions and divestitures was excluded.
- Commodity price forecasts used in the independent evaluation, relative to the 2011 evaluation period, were down approximately 15% for natural gas in Canada, which represents 44% of the corporate proved plus probable reserve volumes and down approximately 3% (6% in Canada and 2% in Tunisia) for the oil, which represents 51% of the corporate proved plus probable reserve volumes. As a result of the reduction in the price forecast, Chinook recorded a 1.33 million barrels of oil equivalent loss of reserves due to economic factors.
- The after tax net asset value at December 31, 2012, is $3.11 per basic share (214.2 million shares) based on the net present value of proved and probable reserves, discounted at 10% after tax and after deducting year end total net debt and adding an estimated value of $100 per acre for its 357,745 acres of undeveloped land in Canada. On a before tax basis, with a similar 10% discount rate, the net asset value is $4.21 per basic share.
- Gross Discovered Petroleum Initially in Place ("DPIIP") associated with the Bir Ben Tartar (TT) discovery on the Sud Remada permit in Tunisia, after the addition of five development wells in 2012, is estimated to be 201.7 million barrels of oil. Proved and probable reserves net to the Company of 5.1 million barrels of oil represent the Company's 48% Contractor's share of the 10.7 million barrels of oil remaining recoverable. Proved and probable reserves have been assigned to areas representing 44% of the DPIIP up to a 13% recovery, or an average of 5% recovery for the entire structure. An additional 2.5 million barrels of oil of possible reserves and a Best Case Contingent Resource of 7.2 million barrels net to the Company's interest is attributable to the DPIIP area to which proved and probable reserves have not been assigned up to the date of evaluation. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will exceed the sum of proved plus probable reserves. On this basis, 44% of the reserve and resource potential recognized on the block is reflected in the Company's NI 51-101 reserves and net asset value. The net present value after tax discounted at 10% for the proved plus probable reserves is $163 million or $34.95 per barrel.
2012 Operational Highlights and Unaudited Full Year Results
Chinook's average daily production for fiscal year 2012 was 12,197 barrels of oil equivalent per day. Production for the last half of 2012 was 11,826 barrels of oil equivalent per day and for the fourth quarter was 11,688 barrels of oil equivalent per day. Projected cash flow from operations (before changes in non-cash working capital) for 2012 is estimated at $78.2 million or $0.37 per weighted average basic common share outstanding (unaudited). Year end 2012 net debt is $72.1 million.
The Canadian business focused on crude oil project development in the core areas of Grande Prairie and the Peace River Arch along with the disposition of $107.4 million of non-strategic assets representing approximately 1,600 boe/d of production. The Tunisian business focused on further light oil development and delineation and increased production on the Bir Ben Tartar Concession ("BBT Concession"). The corporate drilling program consisted of 19 (10.05 net) wells of which 11 were operated and eight were non-operated wells. The results are outlined in the table below:
| Wells Drilled | |||||||
| Year ended December 31, 2012 | Tunisia | Canada | Total | ||||
| Gross | Net | Gross | Net | Gross | Net | ||
| Exploration | |||||||
| Oil | - | - | 4 00 | 1.86 | 4.00 | 1.86 | |
| Gas | - | - | - | - | - | - | |
| Dry | 2.00 | 0.96 | - | - | 2.00 | 0.96 | |
| 2.00 | 0.96 | 4.00 | 1.86 | 6.00 | 2.82 | ||
| Development | |||||||
| Oil | 6.00 | 4.35 | 6.00 | 1.88 | 12.00 | 6.23 | |
| Gas | - | - | 1.00 | 1.00 | 1.00 | 1.00 | |
| Dry | - | - | - | - | - | - | |
| 6.00 | 4.35 | 7.00 | 2.88 | 13.00 | 7.23 | ||
| Total | 8.00 | 5.31 | 11.00 | 4.74 | 19.00 | 10.05 | |
Revised 2013 Guidance
As a result of higher initial water cuts associated with the most recent horizontal wells drilled on the BBT Concession, coupled with delays in commencement of the 2013 BBT Concession drilling program, the Company has revised its guidance for 2013 as set forth below from the initial 2013 guidance which was provided on November 13, 2012. The Company has also reduced its capital program by $38 million to $102-107 million in 2013 as a result.
| Revised Guidance (1) | ||||||
| ($ millions, except boe/d) | Consolidated | International | Canada | |||
| Production (boe/d) | 9,500 - 10,200 | 2,150 - 2,450 | 7,350 - 7,750 | |||
| Cash flow | $ | 95 - 100 | $ | 55 - 58 | $ | 40 - 42 |
| Capital expenditures | $ | 102 - 107 | $ | 58 - 60 | $ | 44 - 47 |
| Net debt | $ | 60 - 65 | - | - | ||
| Debt facility | $ | 115 | - | $ | 115 | |
| (1) | Revised guidance is based on: AECO gas price of $3.22/mcf; Edmonton light oil price of $89.80/bbl (CDN); Brent oil price of $104.75/bbl (CAD); 54% natural gas production; 46% liquids. |
| Previous Guidance (2) | ||||||
| ($ millions, except boe/d) | Consolidated | International | Canada | |||
| Production (boe/d) | 10,800 - 11,500 | 3,000 - 3,400 | 7,800 - 8,100 | |||
| Cash flow | $ | 130 - 135 | $ | 90 - 94 | $ | 38 - 41 |
| Capital expenditures | $ | 140 - 145 | $ | 90 - 95 | $ | 45 - 50 |
| Net debt | $ | 95-100 | - | - | ||
| Debt facility | $ | 115 | - | $ | 115 | |
| (2) | Previous guidance was based on: AECO gas price of $3.26/mcf; Edmonton light oil price of $88.94/bbl (CDN); Brent oil price of $103.00/bbl (CAD); 47% natural gas production; 53% liquids. |
Tunisia Security Update
The operating environment in Tunisia has become more complicated and the necessity to increase security at the Company's operations has risen since late last year. The number of local land use concerns continues to rise and the precedents to resolve them are nonexistent or ineffective in many cases. Stakeholder frustrations often manifest themselves as "sit ins" that disrupt Chinook's work or logistics. There are ongoing efforts to resolve the issues and streamline the process but until material commitments and progress are evident, the Company is unable to achieve the economies or timeline that had been planned. Although operations are impacted, production has not been impacted owing to storage capacity being well in excess of the duration of the stoppages to date. From a security perspective, Chinook has completed the planning phase of an audit and upgrade of its capabilities and systems and will be implementing the majority of the recommendations prior the commencement of its next program and all before the end of the year. This was in progress prior to the most recent events that continue to destabilize the political landscape but those recent events clearly reinforce the necessity that the Company minimizes risk by increasing its awareness and preparedness.
Canadian Non-Strategic Disposition Update
The Company's ongoing non-strategic asset sale process has resulted in executed letters of intent for the sale of approximately 580 boe/d and gross proceeds, before closing adjustments, of approximately $19.5 million to be closed in the first quarter. The disposition of non-core assets as a means to maintain a strong balance sheet and increase the per barrel profitability of the Company's core Canadian assets will be a continued priority for the Company.
2012 Independent Reserves Evaluation
The independent evaluators of the Company's year-end reserves are as follows:
- McDaniel & Associates Consultants Ltd. ("McDaniel") evaluated all of the Canadian properties effective December 31, 2012 and report dated February 8, 2013;
- InSite Petroleum Consultants Ltd. ("InSite") evaluated all of the Tunisia interests effective December 31, 2012 and report dated February 26, 2013; and
The independent reserve evaluations effective December 31, 2012 were prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101 ("NI 51-101"). The reserve evaluation was based on McDaniel forecast pricing and foreign exchange rates at December 31, 2012.
Reserves included herein are stated on a Company gross basis (working interest before deduction of royalties without including any royalty interests) unless noted otherwise. This news release contains several cautionary statements that are specifically required by NI 51-101 under the heading "Reader Advisory" and throughout the release. In addition to the information contained in this news release more detailed information will be included in Chinook's Annual Information Form for the year ended December 31, 2012 ("AIF"), which will be filed on SEDAR at www.sedar.com on or about March 27, 2013.
Reserves Breakdown (Company interest before royalties) (1)
(December 31, 2012, escalated price forecast)
| (mboe) | 2012 | 2011 |
| Proved Producing | ||
| Canada | 14,966 | 20,906 |
| Tunisia | 1,516 | 1,294 |
| Total proved producing | 16,482 | 22,200 |
| Proved | ||
| Canada | 19,069 | 25,227 |
| Tunisia | 9,880 | 6,940 |
| Total proved | 28,949 | 32,167 |
| Proved Plus Probable Additional | ||
| Canada | 31,207 | 38,995 |
| Tunisia | 20,445 | 16,816 |
| Total proved plus probable additional | 51,652 | 55,811 |
| Note: | (1) | Columns may not add due to rounding. |
Gross and Net Company Interest Reserves as at December 31, 2012
The following table summarizes the Company's gross and net interest reserve volumes utilizing McDaniel's forecast pricing and cost estimates at December 31, 2012.
| Light and medium oil | Heavy oil | Natural Gas |
Natural gas liquids | Oil equivalent (6:1) | ||||||||||||
| Reserves category | Gross (1)
(mbbl) |
Net (2)
(mbbl) |
Gross (1)
(mbbl) |
Net (2) (mbbl) |
Gross (1)
(mmcf) |
Net (2)
(mmcf) |
Gross(1) (mbbl) |
Net (2)
(mbbl) |
Gross(1)
(mboe) |
Net (2)
(mboe) |
||||||
| Canada | ||||||||||||||||
| Proved | ||||||||||||||||
| Developed producing | 2,720 | 2,314 | 187 | 181 | 63,125 | 53,164 | 1,538 | 1,107 | 14,966 | 12,462 | ||||||
| Developed non-producing | 714 | 588 | 34 | 31 | 11,839 | 10,190 | 202 | 151 | 2,923 | 2,468 | ||||||
| Undeveloped | 902 | 752 | - | - | 1,541 | 1,356 | 22 | 16 | 1,181 | 994 | ||||||
| Total proved | 4,337 | 3,654 | 221 | 212 | 76,505 | 64,710 | 1,761 | 1,274 | 19,069 | 15,925 | ||||||
| Probable additional | 2,487 | 1,995 | 77 | 72 | 50,583 | 41,393 | 1,143 | 825 | 12,138 | 9,791 | ||||||
| Total proved plus probable | 6,824 | 5,649 | 298 | 284 | 127,088 | 106,103 | 2,904 | 2,099 | 31,207 | 25,716 | ||||||
| Tunisia | ||||||||||||||||
| Proved | ||||||||||||||||
| Developed producing | 1,308 | 1,255 | - | - | 1,246 | 1,121 | - | - | 1,516 | 1,442 | ||||||
| Developed non-producing | 466 | 414 | - | - | 2,498 | 2,265 | - | - | 882 | 790 | ||||||
| Undeveloped | 7,138 | 6,643 | - | - | 2,067 | 1,874 | - | - | 7,482 | 6,955 | ||||||
| Total proved | 8,912 | 8,311 | - | - | 5,810 | 5,260 | - | - | 9,880 | 9,187 | ||||||
| Probable additional | 10,212 | 9,290 | - | - | 2,116 | 1,904 | - | - | 10,565 | 9,608 | ||||||
| Total proved plus probable | 19,124 | 17,601 | - | - | 7,926 | 7,165 | - | - | 20,445 | 18,795 | ||||||
| Total company | ||||||||||||||||
| Proved | ||||||||||||||||
| Developed producing | 4,029 | 3,569 | 187 | 181 | 64,371 | 54,285 | 1,538 | 1,107 | 16,482 | 13,904 | ||||||
| Developed non-producing | 1,180 | 1,001 | 34 | 31 | 14,337 | 12,454 | 202 | 151 | 3,805 | 3,259 | ||||||
| Undeveloped | 8,040 | 7,395 | - | - | 3,607 | 3,230 | 22 | 16 | 8,663 | 7,949 | ||||||
| Total proved | 13,248 | 11,965 | 221 | 212 | 82,315 | 69,970 | 1,761 | 1,274 | 28,949 | 25,112 | ||||||
| Probable additional | 12,700 | 11,285 | 77 | 72 | 52,699 | 43,297 | 1,143 | 825 | 22,703 | 19,399 | ||||||
| Total proved plus probable | 25,948 | 23,250 | 298 | 284 | 135,014 | 113,267 | 2,904 | 2,099 | 51,652 | 44,511 | ||||||
| Notes: | |
| (1) | Gross reserves are the Company's working interest reserves before royalty deductions and do not include royalty interest volumes. |
| (2) | Net reserves are after royalty deductions and include royalty interest volumes. |
| (3) | Columns may not add due to rounding. |
Gross Company Reserve Reconciliation for 2012 (1)
(Gross company interest reserves before deduction of royalties payable)
| 6:1 Oil Equivalent (mboe) | ||||||
| Total Proved | Probable | Proved Plus Probable |
||||
| December 31, 2011 - opening balance | 32,167 | 23,644 | 55,811 | |||
| Additions and extensions | 1,413 | 2,721 | 4,134 | |||
| Category transfers | 731 | (731 | ) | - | ||
| Discoveries | - | 204 | 204 | |||
| Acquisitions | 1,459 | 686 | 2,145 | |||
| Dispositions | (4,364 | ) | (2,159 | ) | (6,522 | ) |
| Technical revisions | 3,164 | (1,488 | ) | 1,675 | ||
| Economic factors | (1,157 | ) | (174 | ) | (1,332 | ) |
| Production | (4,464 | ) | - | (4,464 | ) | |
| December 31, 2012 - closing balance | 28,949 | 22,703 | 51,652 | |||
| Note: | (1) | Columns may not add due to rounding. |
Consolidated
Net Present Value ("NPV") Summary (before tax) as at December 31, 2012
(December 31, 2012, escalated price forecast)
Benchmark oil and NGL prices used are adjusted for quality of oil or NGL produced and for transportation costs. The calculated NPVs include a deduction for estimated future well abandonment but does not include a provision for interest, debt service charges and general and administrative expenses. It should not be assumed that the NPV estimated represents the fair market value of the reserves.
| ($ thousands) | Undiscounted | Discounted at 5% | Discounted at 10% | Discounted at 15% | Discounted at 20% |
| Proved producing | 335,042 | 285,878 | 250,968 | 224,947 | 204,803 |
| Proved non-producing | 99,764 | 80,735 | 67,458 | 57,718 | 50,289 |
| Total proved developed | 434,806 | 366,613 | 318,426 | 282,665 | 255,092 |
| Proved undeveloped | 252,823 | 197,646 | 158,232 | 128,034 | 103,942 |
| Total proved | 687,630 | 564,259 | 476,657 | 410,699 | 359,034 |
| Probable additional | 843,405 | 606,581 | 461,209 | 362,612 | 291,843 |
| Total proved plus probable | 1,531,035 | 1,170,840 | 937,867 | 773,311 | 650,877 |
Canada
Net Present Value Summary (before tax) as at December 31, 2012
(December 31, 2012, escalated price forecast)
| ($ thousands) | Undiscounted | Discounted at 5% | Discounted at 10% | Discounted at 15% | Discounted at 20% |
| Proved producing | 259,435 | 215,015 | 184,098 | 161,483 | 144,280 |
| Proved non-producing | 51,720 | 40,995 | 33,880 | 28,836 | 25,068 |
| Total proved developed | 311,154 | 256,010 | 217,979 | 190,319 | 169,348 |
| Proved undeveloped | 43,837 | 27,532 | 18,670 | 13,165 | 9,439 |
| Total proved | 354,991 | 283,542 | 236,649 | 203,484 | 178,786 |
| Probable additional | 259,321 | 152,488 | 101,040 | 72,055 | 53,987 |
| Total proved plus probable | 614,313 | 436,030 | 337,689 | 275,539 | 232,773 |
Tunisia
Net Present Value Summary (before tax) as at December 31, 2012
(December 31, 2012, escalated price forecast)
| ($ thousands) | Undiscounted | Discounted at 5% | Discounted at 10% | Discounted at 15% | Discounted at 20% |
| Proved producing | 75,608 | 70,863 | 66,870 | 63,464 | 60,523 |
| Proved non-producing | 48,045 | 39,740 | 33,577 | 28,882 | 25,221 |
| Total proved developed | 123,652 | 110,603 | 100,447 | 92,346 | 85,745 |
| Proved undeveloped | 208,986 | 170,114 | 139,562 | 114,869 | 94,503 |
| Total proved | 332,639 | 280,717 | 240,009 | 207,215 | 180,248 |
| Probable additional | 584,083 | 454,094 | 360,169 | 290,557 | 237,856 |
| Total proved plus probable | 916,722 | 734,810 | 600,178 | 497,772 | 418,103 |
Consolidated
Net Present Value Summary (after tax) as at December 31, 2012
(December 31, 2012, escalated price forecast)
The after-tax NPV of Chinook's oil and natural gas properties reflects the tax burden on the properties on a stand-alone basis and does not consider the business-entity-level tax situation, or tax planning. It does not provide an estimate of the value at the level of the business entity, which may be significantly different. The financial statements and the management's discussion and analysis ("MD&A") of Chinook should be consulted for information at the level of the business entity.
| ($ thousands) | Undiscounted | Discounted at 5% | Discounted at 10% | Discounted at 15% | Discounted at 20% |
| Proved producing | 320,508 | 272,832 | 239,105 | 214,042 | 194,689 |
| Proved non-producing | 76,864 | 62,053 | 51,838 | 44,393 | 38,728 |
| Total proved developed | 397,372 | 334,885 | 290,943 | 258,435 | 233,417 |
| Proved undeveloped | 177,286 | 133,276 | 102,307 | 78,794 | 60,152 |
| Total proved | 574,658 | 468,161 | 393,250 | 337,229 | 293,569 |
| Probable additional | 573,538 | 409,305 | 309,563 | 242,414 | 194,482 |
| Total proved plus probable | 1,148,196 | 877,466 | 702,813 | 579,643 | 488,051 |
Canada
Net Present Value Summary (after tax) as at December 31, 2012
(December 31, 2012, escalated price forecast)
| ($ thousands) | Undiscounted | Discounted at 5% | Discounted at 10% | Discounted at 15% | Discounted at 20% |
| Proved producing | 259,435 | 215,015 | 184,098 | 161,483 | 144,280 |
| Proved non-producing | 51,720 | 40,995 | 33,880 | 28,836 | 25,068 |
| Total proved developed | 311,154 | 256,010 | 217,979 | 190,319 | 169,348 |
| Proved undeveloped | 43,837 | 27,532 | 18,670 | 13,165 | 9,439 |
| Total proved | 354,991 | 283,542 | 236,649 | 203,484 | 178,786 |
| Probable additional | 218,033 | 133,729 | 91,546 | 66,894 | 51,032 |
| Total proved plus probable | 573,025 | 417,272 | 328,194 | 270,378 | 229,818 |
Tunisia
Net Present Value Summary (after tax) as at December 31, 2012
(December 31, 2012, escalated price forecast)
| ($ thousands) | Undiscounted | Discounted at 5% | Discounted at 10% | Discounted at 15% | Discounted at 20% |
| Proved producing | 61,073 | 57,817 | 55,007 | 52,560 | 50,409 |
| Proved non-producing | 25,144 | 21,058 | 17,958 | 15,557 | 13,660 |
| Total proved developed | 86,217 | 78,875 | 72,965 | 68,116 | 64,069 |
| Proved undeveloped | 133,449 | 105,744 | 83,637 | 65,629 | 50,713 |
| Total proved | 219,667 | 184,619 | 156,602 | 133,745 | 114,783 |
| Probable additional | 355,504 | 275,575 | 218,017 | 175,520 | 143,450 |
| Total proved plus probable | 575,171 | 460,194 | 374,619 | 309,265 | 258,233 |
McDaniel & Associates Consultants Ltd. Escalating Price Forecast as at December 31, 2012 (1)
| WTI Crude Oil (US$/bbl) |
Brent (US$/bbl) |
Edmonton Light Crude Oil (Cdn$/bbl) |
Henry Hub Natural Gas (US$/mmbtu) |
AECO Natural Gas (Cdn$/mmbtu) |
Edmonton Condensate and Natural Gasoline (Cdn$/bbl) |
Propane (Cdn$/bbl) |
Butane (Cdn$/bbl) |
US/Cdn Exchange (US$/Cdn) |
|||||
| 2013 | 92.50 | 107.50 | 87.50 | 3.75 | 3.35 | 97.50 | 34.90 | 64.10 | 1.000 | ||||
| 2014 | 92.50 | 102.50 | 90.50 | 4.30 | 3.85 | 95.60 | 44.20 | 69.60 | 1.000 | ||||
| 2015 | 93.60 | 101.40 | 92.60 | 4.85 | 4.35 | 95.70 | 52.00 | 74.60 | 1.000 | ||||
| 2016 | 95.50 | 100.80 | 94.50 | 5.25 | 4.70 | 97.70 | 53.70 | 76.20 | 1.000 | ||||
| 2017 | 97.40 | 100.10 | 96.40 | 5.70 | 5.10 | 99.60 | 55.60 | 77.70 | 1.000 | ||||
| 94.30 | 102.46 | 92.30 | 4.77 | 4.27 | 97.22 | 48.08 | 72.44 | 1.000 |
| Note: | (1) | Prices escalate at two percent per year after 2017. |
Future Development Costs ("FDC")
NI 51-101 requires that future development costs be calculated including changes in FDC. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities and capital cost estimates that reflect the independent evaluators' best estimate of what it will cost to bring the proved undeveloped and probable reserves on production.
| ($ millions) | |||
| 2012 | 2011 | ||
| Proved | |||
| Canada | 28.1 | 27.4 | |
| Tunisia | 242.3 | 158.6 | |
| Total proved | 270.4 | 186.0 | |
| Proved Plus Probable | |||
| Canada | 66.7 | 60.4 | |
| Tunisia | 402.4 | 301.0 | |
| Total proved plus probable | 469.1 | 361.4 | |
Chinook's approved 2013 budget includes the drilling of 13 wells (7.5 net) in Canada and 8.0 wells (6.1 net) in Tunisia.
NI 51-101 Finding and Development Costs ("F&D")
| Total Proved Finding and Development Cost ($ thousands, except per unit amounts) | 2012 | 2011 | 2010 | Three year total | ||||
| Capital expenditures excluding acquisitions and dispositions, abandonment and furniture and fixtures (unaudited) | 84,316 | 124,981 | 45,861 | 255,158 | ||||
| Net change from previously allocated future development capital | 78,689 | 20,471 | 19,107 | 118,267 | ||||
| Total capital including the net change in future capital | 163,005 | 145,452 | 64,968 | 373,424 | ||||
| Reserve additions excluding acquisitions and dispositions (mboe) | 4,151 | 2,671 | 2,404 | 9,226 | ||||
| Total proved finding and development costs (per boe) | $ | 39.27 | $ | 54.45 | $ | 27.02 | $ | 40.47 |
| Total Proved Plus Probable Finding and Development Cost ($ thousands, except per unit amounts) | 2012 | 2011 | 2010 | Three year total | ||||
| Capital expenditures excluding acquisitions and dispositions, abandonment and furniture and fixtures (unaudited) | 84,316 | 124,981 | 44,994 | 254,291 | ||||
| Net change from previously allocated future development capital | 103,880 | 31,893 | 30,026 | 165,799 | ||||
| Total capital including the net change in future capital | 188,196 | 156,874 | 75,020 | 420,090 | ||||
| Reserve additions excluding acquisitions and dispositions (mboe) | 4,682 | 2,877 | 4,090 | 11,649 | ||||
| Total proved plus probable finding and development costs (per boe) | $ | 40.19 | $ | 54.53 | $ | 18.34 | $ | 36.06 |
Finding and Development Costs ("F&D")
| Total Proved Finding and Development Cost Including FDC, excluding Acquisitions, Dispositions, Revisions, and Economic Factors ($ thousands, except per unit amounts) | 2012 | 2011 | 2010 | Three year total | ||||
| Capital expenditures excluding acquisitions and dispositions abandonment and furniture and fixtures (unaudited) (1) | 84,316 | 124,981 | 59,139 | 268,436 | ||||
| Net change from previously allocated future development capital | 52,099 | 12,685 | 4,782 | 69,566 | ||||
| Total capital including the net change in future capital | 136,415 | 137,666 | 63,921 | 338,002 | ||||
| Reserve additions including acquisitions, dispositions and revisions (mboe) | 2,145 | 3,942 | 2,353 | 8,439 | ||||
| All-in total proved finding and development costs (per boe) | $ | 63.61 | $ | 34.92 | $ | 27.17 | $ | 40.05 |
| Note: | (1) | Excludes non-cash costs, including decommissioning liabilities. |
| Total Proved Plus Probable Finding and Development Cost Including FDC, excluding Acquisitions, Dispositions, Revisions, and Economic Factors ($ thousands, except per unit amounts) | 2012 | 2011 | 2010 | Three year total | ||||
| Capital expenditures excluding acquisitions and dispositions,abandonment and furniture and fixtures (unaudited) (1) | 84,316 | 124,981 | 59,139 | 268,436 | ||||
| Net change from previously allocated future development capital | 95,915 | 39,390 | 9,232 | 144,537 | ||||
| Total capital including the net change in future capital | 180,230 | 164,371 | 68,371 | 412,972 | ||||
| Reserve additions including acquisitions, dispositions and revisions (mboe) | 4,339 | 6,480 | 3,654 | 14,472 | ||||
| All-in total proved plus probable finding and development costs (per boe) | $ | 41.54 | $ | 25.37 | $ | 18.71 | $ | 28.54 |
| Note: | (1) | Excludes non-cash costs, including decommissioning liabilities. |
Total exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs, generally will not reflect the total cost of reserve additions in that year.
Recycle Ratio
The recycle ratio is calculated as the annual netback per barrel divided by the NI 51-101 calculated finding and development costs (excluding acquisitions and dispositions, abandonment and furniture and fixtures).
| Total Proved | Consolidated | Canada | Tunisia |
| Operating netback before commodity price contracts ($/boe)(unaudited) (1) | 23.31 | 11.86 | 81.83 |
| 51-101 F&D costs ($/boe)(unaudited) | 39.27 | 47.87 | 38.17 |
| Recycle ratio | 0.6x | 0.2x | 2.1x |
| Total Proved Plus Probable | Consolidated | Canada | Tunisia |
| Operating netback before commodity price contracts ($/boe)(unaudited) (1) | 23.31 | 11.86 | 81.83 |
| 51-101 F&D costs ($/boe)(unaudited) | 40.19 | 96.22 | 36.20 |
| Recycle ratio | 0.6x | 0.1x | 2.3x |
| Note: | (1) | Operating netback is calculated by deducting royalties and net production expenses from revenue. |
Presented below is the recycle ratio as calculated by using the annual netback per barrel divided by the calculated finding and development costs (excluding acquisitions and dispositions, abandonment and furniture and fixtures) and excluding the effects of revisions and economic factors.
| Total Proved | Consolidated | Canada | Tunisia |
| Operating netback before commodity price contracts ($/boe)(unaudited) (1) | 23.31 | 11.86 | 81.83 |
| F&D costs net of acquisitions, revisions and economic factors ($/boe)(unaudited) | 63.61 | 34.76 | 106.63 |
| Recycle ratio | 0.4x | 0.3x | 0.8x |
| Total Proved Plus Probable | Consolidated | Canada | Tunisia |
| Operating netback before commodity price contracts ($/boe)(unaudited) (1) | 23.31 | 11.86 | 81.83 |
| F&D costs net of acquisitions, revisions and economic factors ($/boe)(unaudited) | 41.54 | 17.23 | 67.20 |
| Recycle ratio | 0.6x | 0.7x | 1.2x |
| Note: | (1) | Operating netback is calculated by deducting royalties and net production expenses from revenue. |
Corporate Net Asset Value
The Company's net asset value as of December 31, 2012, is detailed in the following table. This net asset value determination is a "point-in-time" measurement and does not take into account the possibility of Chinook being able to recognize additional reserves through successful future capital investment in its existing properties beyond those included in the 2012 year-end reserve reports.
| December 31, 2012 | Before Tax NPV 5 | % | Before Tax NPV 10 | % | Before Tax NPV 15 | % | ||||||
| ($ thousands | ) | $/share | ($ thousands | ) | $/share | ($ thousands | ) | $/share | ||||
| Proved plus probable reserves NPV (1,2) | 1,170,840 | 5.47 | 937,867 | 4.38 | 773,311 | 3.61 | ||||||
| Undeveloped acreage (3) | 35,774 | 0.17 | 35,774 | 0.17 | 35,774 | 0.17 | ||||||
| Net debt (4) | (72,121 | ) | (0.34 | ) | (72,121 | ) | (0.34 | ) | (72,121 | ) | (0.34 | ) |
| Net asset value (basic) (5) | 1,134,493 | 5.30 | 901,520 | 4.21 | 736,964 | 3.44 | ||||||
| December 31, 2012 | After Tax NPV 5 | % | After Tax NPV 10 | % | After Tax NPV 15 | % | ||||||
| ($ thousands | ) | $/share | ($ thousands | ) | $/share | ($ thousands | ) | $/share | ||||
| Proved plus probable reserves NPV (1,2) | 877,466 | 4.10 | 702,813 | 3.28 | 579,643 | 2.71 | ||||||
| Undeveloped acreage (3) | 35,774 | 0.17 | 35,774 | 0.17 | 35,774 | 0.17 | ||||||
| Net debt (4) | (72,121 | ) | (0.34 | ) | (72,121 | ) | (0.34 | ) | (72,121 | ) | (0.34 | ) |
| Net asset value (basic) (5) | 841,119 | 3.93 | 666,466 | 3.11 | 543,296 | 2.54 | ||||||
| Notes: | |
| (1) | Evaluated by independent reserve evaluators as at December 31, 2012. Net present value of future net revenue does not represent the fair market value of the reserves. |
| (2) | Net present values for before and after tax are based on McDaniel's December 31, 2012 escalated price forecast. |
| (3) | Undeveloped land value has been calculated based on internal estimates of $100/acre for all Canadian lands. |
| (4) | Net debt as at December 31, 2012, including working capital deficit (estimated and unaudited). |
| (5) | Basic shares at December 31, 2012 total 214,187,681 common shares. |
Chinook's audited consolidated financial statements and its annual information form for the year ended December 31, 2012, which will include more detailed reserves information, are expected to be filed on SEDAR (www.sedar.com) on or about March 27, 2013.
Bir Ben Tartar - Discovered Petroleum Initially-in-Place
InSite assigned 201.7 million barrels of Discovered Petroleum Initially-In-Place ("DPIIP") to the Bir Ben Tartar (TT Field) discovery as at December 31, 2012.
DPIIP is the quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of DPIIP is divided into commercial (reserves), and sub-commercial (Contingent Resources); the remainder is by definition unrecoverable. Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies.
Contingencies which must be overcome to enable the reclassification of Contingent Resources as reserves can be categorized as economic, non-technical and technical. The Canadian Oil and Gas Evaluation Handbook identifies non-technical contingencies as legal, environmental, political and regulatory matters or a lack of markets. There are several non-technical contingencies that prevent the classification of the Contingent Resources estimated below as being classified as reserves. Although certain areas of the blocks subject to the estimates are currently undergoing development under approved plans, these plans do not include the areas of the reservoirs with which all of the Contingent Resources summarized in the table below are associated. As of the effective date of the evaluation, information was not available concerning the regulatory status or, in certain instances, conceptual development plans under which such Contingent Resources could be brought on production, nor was information available regarding the likelihood of any such development plans being approved by Chinook, by its partners in the field, nor by ETAP. Other non-technical contingencies may include regulatory application submission with no major issues raised, access to markets and intent to proceed by the operator and other partners as evidenced by major capital expenditures planned. Technical contingencies that prevent the classification of the Contingent Resources as reserves include the early stage of development, the requirement for further delineation drilling and testing, lack of full field development plans and the associated facility design. While it is premature at this time to identify the economic viability of any of the Contingent Resources since evaluations are currently incomplete and as such, the economic status of the Contingent Resources is currently undetermined, Chinook is actively carrying out activities on the TT Field in order to enable it to complete the necessary economic assessment(s). Furthermore, certain of the reservoir areas evaluated in the Contingent Resources estimate cover extensive areas that will require considerable development activity and investment to fully exploit.
Estimates of DPIIP and Contingent Resources described herein are estimates only; the actual resources may be higher or lower than those calculated in InSite's report. There is no certainty that will be commercially viable to produce any portion of the resources described herein.
The most significant positive and negative factors with respect to the Contingent Resource estimates in respect of the Bir Ben Tartar (TT) discovery relate to fact that the field is currently at an evaluation/delineation stage.
The table below summarizes the DPIIP, Reserves, Cumulative Production, Contingent Resources and portion of the unrecoverable portion of DPIIP associated with the Bir Ben Tartar (TT) discovery.
| Category | mbbls |
| DPIIP | 201,700 |
| Gross Proved + Probable Reserves | 10,663 |
| Gross Cumulative Production | 1,884 |
| Gross Contingent Resource (Best Estimate) | 15,166 |
| Unrecoverable DPIIP | 174,016 |
About Chinook Energy Inc.
Chinook is a Calgary-based public oil and gas exploration and development company that combines high quality natural gas-weighted assets in Western Canada with an exciting high growth oil business onshore and offshore Tunisia in North Africa.
Definitions of Oil and Gas Resources and Reserves
Reserves are estimated remaining quantities of oil and natural gas and related substance anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical and engineering data; the use of established technology, and specified economic conditions, which are generally accepted as being reasonable. Reserves are classified according to the degree of certainty associated with the estimates as follows:
Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
Possible Reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves. There is 10% probability that the quantities recovered will exceed the sum of proved and probable reserves.
Resources encompasses all petroleum quantities that originally existed on or within the earth's crust in naturally occurring accumulations, including Discovered and Undiscovered (recoverable and unrecoverable) plus quantities already produced. "Total resources" is equivalent to "Total Petroleum Initially-In-Place". Resources are classified in the following categories:
Discovered Petroleum Initially-In-Place ("DPIIP") is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially-in-place includes production, reserves, and contingent resources; the remainder is unrecoverable.
Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development but which are not currently considered to be commercially recoverable due to one or more contingencies.
Unrecoverable is that portion of DPIIP quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.
Uncertainty Ranges are described by the COGE Handbook as low, best, and high estimates for reserves and resources as follows:
Low Estimate: This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
Best Estimate: This is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
High Estimate: This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.
Reader Advisory
Forward-Looking Statements
In the interest of providing shareholders and potential investors with information regarding Chinook, including management's assessment of the future plans and operations of Chinook, certain statements contained in this news release constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In addition, statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this news release contains, without limitation, forward-looking statements pertaining to: expectations of future plans regarding the Canadian non-core asset sale process; the volumes and estimated value of Chinook's oil and natural gas reserves; the life of Chinook's reserves; the volume and product mix of Chinook's oil and natural gas production; future oil and natural gas prices and Chinook's commodity risk management program; future results from operations and operating metrics; and future development, exploration, acquisition and development activities (including drilling plans) and related production expectations as well as management's future expectations regarding production, cash flow, capital expenditures, net debt and debt facility set out under the heading "Revised 2013 Guidance".
With respect to the forward-looking statements contained in this news release, Chinook has made assumptions regarding, among other things: that Chinook will continue to conduct its operations in a manner consistent with past operations, the ability of Chinook to continue to operate in Tunisia with limited logistical security and operational issues, future capital expenditure levels, future oil and natural gas prices, future oil and natural gas production levels, Chinook's ability to obtain equipment in a timely manner to carry out development activities, the impact of increasing competition, the ability of Chinook to add production and reserves through development and exploitation activities, certain commodity price and other cost assumptions, the continued availability of adequate debt and equity financing and cash flow to fund its planned expenditures. Although Chinook believes that the expectations reflected in the forward-looking statements contained in this news release, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this news release, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur.
By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that predictions, forecasts, projections and other forward-looking statements will not occur, which may cause Chinook's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, without limitation, political and security risk associated with Chinook's Tunisian operations, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve and resource estimates, the continued impact of shut-in production, environmental risks, competition from other producers, inability to retain drilling rigs and other services, capital expenditure costs, including drilling, completion and facilities costs, unexpected decline rates in wells, delays in projects and/or operations resulting from surface conditions, wells not performing as expected, delays resulting from or inability to obtain the required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the forgoing list of factors is not exhaustive. Additional information on these and other factors that could effect Chinook's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and at Chinook's website (www.chinookenergyinc.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Chinook does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Barrels of Oil Equivalent
Barrels of oil equivalent (boe) is calculated using the conversion factor of 6 mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl (barrel) 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 of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Reserve Life Index
The reader is also cautioned that this news release contains the term reserve life index ("RLI"), which is not a recognized measure under GAAP. Management believes that this measure is a useful supplemental measure of the length of time the reserves would be produced over at the rate used in the calculation. Readers are cautioned, however, that this measure should not be construed as an alternative to other terms determined in accordance with GAAP as a measure of performance. Chinook's method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.
Operating Netback
The reader is also cautioned that this news release contains the term operating netback, which is not a recognized measure under GAAP and is calculated as a period's sales of petroleum and natural gas, net of royalties less net production and operating expenses as divided by the period's sales volumes. Management uses this measure to assist them in understanding Chinook's profitability relative to current commodity prices and it provides an analysis tool to benchmark changes in operational performance against prior periods and to peers on a comparable basis. Readers are cautioned, however, that this measure should not be construed as an alternative to other terms such as net income determined in accordance with GAAP as a measure of performance. Chinook's method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.
Cash flow from operations
The reader is also cautioned that this news release contains the term cash flow from operations, which is not a recognized measure under GAAP and is calculated from cash flow from continuing operations adjusted for changes in non-cash working capital. Management believes that cash flow is a key measure to assess the ability of Chinook to finance capital expenditures and debt repayments. Readers are cautioned, however, that this measure should not be construed as an alternative to other terms such as cash flow from operating activities, net income or other measures of financial performance calculated in accordance with GAAP. Chinook's method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.
Contact Information:
Walter Vrataric
President
(403) 261-6883
Chinook Energy Inc.
L. Geoff Barlow
Vice-President, Finance and Chief Financial Officer
(403) 261-6883
www.chinookenergyinc.com