Strategic Oil & Gas Ltd. Announces Year-End Reserves, Updated Resource Assessment, Credit Facility Adjustment and Revised 2015 Budget
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 02/26/15 -- Strategic Oil & Gas Ltd. ("Strategic" or the "Company") (TSX VENTURE: SOG) is pleased to announce its year-end reserves and an updated third party resource assessment. Strategic achieved a 41 percent increase in proved and probable reserves at Marlowe, for a 403 percent reserve replacement ratio. The Company's independent reserve auditors have increased their assessment of the total petroleum initially in place for the Muskeg Stack at Marlowe to 916 MMbbl.
HIGHLIGHTS - MARLOWE
HIGHLIGHTS - CORPORATE
REVISED 2015 BUDGET AND CREDIT FACILITY
In response to low commodity prices, Strategic has made several changes to its cost structure and 2015 capital spending budget to preserve financial flexibility:
With the shut-in of production at Bistcho and Cameron Hills, the Company estimates that production for the first six months of 2015 will average 3,000 boe/d (73 percent oil). Approximately 35 percent of expected oil production for the first half of 2015 is hedged at CDN $90.15/bbl at WTI.
The Company has a credit facility with a major Canadian chartered bank in the amount of $80 million. As a result of low commodity prices, the amount of the facility has been reduced to $60 million, consisting of a $40 million revolving operating loan, with the balance being a non-revolving facility that will be reduced at a rate of $0.5 million per month starting April 1, 2015. Strategic's current net debt (bank debt plus working capital deficiency) is approximately $55 million. The next renewal date for the credit facility is May 1, 2015.
MANAGEMENT COMMENT
Gurpreet Sawhney, Strategic's President and Chief Executive Officer, said: "Despite operating in a difficult commodity price environment, the significant increases to our reserves and resource estimates from McDaniel is a strong statement about the quality of our assets. Our team's ability over the past few years to capture the expansive 350,000 net acres in Marlowe, work to prove up the resource and begin the development process positions Strategic for growth focused on netback expansion. We have the operational flexibility to slow development operations and focus on preserving capital. We are disappointed with the reduction of our borrowing base in light of the increase in our reserves and pre-tax asset value. We are taking the appropriate steps to cure this short-term financial position and look forward to returning to drilling when prices support a return to growth."
RESERVES
In accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), the Company's oil, natural gas and natural gas liquids ("NGL") reserves were evaluated by an independent engineering firm, McDaniel and Associates Consultants Ltd. ("McDaniel") as at December 31, 2014. Gross reserves included in this release are Strategic's working interest reserves before royalty burdens. Complete NI 51-101 reserves disclosure will be included in Strategic's annual NI 51-101 filings which will be filed prior to April 15, 2015. The Company's aggregate proved and probable reserves are reported in barrels of oil equivalent (boe). Boe may be misleading, particularly if used in isolation. A boe conversion ratio for natural gas of 6 Mcf: 1 boe has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil 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.
Strategic's reserves at December 31, 2014 are summarized below.
Approximately 93 percent of the Company's total reserves are located in the Marlowe core area. Proved and probable producing reserves represent 40 percent of total proved and probable reserves, as compared to 52 percent at December 31, 2013.
Strategic's Marlowe reserves at December 31, 2014 are summarized below.
Proved and probable third party reserve bookings for Muskeg Stack wells are below the Company's type curve generated from internal reservoir engineering estimates. This is typical at the early stages of an emerging resource play. The Company anticipates the difference between these estimates will narrow in future years as additional wells are drilled and more extensive production data becomes available.
McDaniel estimates the FDC required to convert undeveloped and non-producing reserves to producing reserves at $132.3 million ($130.6 million at Marlowe). This includes 35 Muskeg Stack and 3 Keg River proven and probable undeveloped locations, of which 22 Muskeg Stack and 1 Keg River are booked as proven undeveloped locations. These wells are anticipated to be drilled over the next 4 years. The total booked locations represent less than 10 percent of the Muskeg Stack inventory identified on Company's land holdings in the Marlowe area.
A reconciliation of the Company's reserves at December 31, 2014 to the previous year-end is as follows.
A reconciliation of the Company's Marlowe reserves at December 31, 2014 to the previous year-end is as follows.
Strategic's light and medium oil, natural gas and NGL reserves were evaluated by McDaniel using McDaniel's product price forecasts effective January 1, 2015 prior to provision for financial risk management contracts, income taxes, interest, debt service charges and general and administrative expenses. The following table summarizes the net present value from recognized reserves at December 31, 2014, assuming various discount rates, and incorporating future development costs and abandonment liabilities. It should not be assumed that the discounted future net revenues estimated by McDaniel represent the fair market value of the Company's assets or future production from the assets.
Strategic incurred capital expenditures of $101 million in 2014, of which $70 million was spent on drilling, completions, recompletions and tie-ins, $28 million on facilities and pipelines, and $3 million was spent on land and seismic. The following table summarizes Strategic's finding and development ("F&D") costs as well as FD&A costs including changes in FDC. F&D and FD&A costs are presented including and excluding infrastructure capital spending of $27.8 million and reserves losses due to economic factors of 1,530 Mboe (proved) and 2,097 Mboe (proved & probable).
2014 F&D and FD&A costs
Strategic incurred capital expenditures of $95 million in 2014 at Marlowe, of which $70 million was spent on drilling, completions, recompletions and tie ins, $24 million on facilities and pipelines, and $1 million was spent on land and seismic. The following table summarizes Strategic's Marlowe finding and development ("F&D") costs as well as FD&A costs, including changes in FDC. F&D and FD&A costs are presented including and excluding infrastructure capital spending of $24 million and reserves losses due to economic factors of 70 Mboe (proved) and 36 Mboe (proved & probable).
Marlowe - 2014 F&D and FD&A costs
MUSKEG STACK RESOURCE RECOGNITION
In order to quantify the future reserve potential, a resource assessment was conducted on the Muskeg Stack, which covers the Company's assets in the Marlowe area, by McDaniel with an effective date of January 1, 2015. The results of this assessment are summarized below.
Petroleum Initially in Place(1,2)
Contingent Resources(3,5)
Prospective Resources(4,5)
Notes:
ABOUT STRATEGIC
Strategic is a junior oil and gas company committed to growth by exploiting its light oil assets in Canada. Strategic's common shares trade on the TSX Venture Exchange under the symbol SOG.
ADDITIONAL INFORMATION
Additional information is also available at and at .
Unaudited Financial Information
Certain financial and operating information included in this press release for the year ended December 31, 2014, such as capital expenditures, production, F&D costs and FD&A costs are based on unaudited financial results, and are subject to the same limitations as discussed under "Forward-Looking Information". These estimated amounts may change upon the completion of audited financial statements for the year-ended December 31, 2014 and changes could be material.
Forward-Looking Statements
This news release includes certain information, with management's assessment of Strategic's future plans and operations, and contains forward-looking statements which may include some or all of the following: (i) anticipated production rates; (ii) expected results of capital programs; (iii) expected timelines for production optimization; (iv) net debt levels; (v) anticipated operating costs; and (vi) expected capital projects and associated spending; which are provided to allow investors to better understand the Company's business. By their nature, forward-looking statements are subject to numerous risks and uncertainties; some of which are beyond Strategic's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, changes in environmental tax and royalty legislation, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources, and other risks and uncertainties described under the heading 'Risk Factors' and elsewhere in the Company's Annual Information Form for the year ended December 31, 2013 and other documents filed with Canadian provincial securities authorities and are available to the public at . Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The principal assumptions Strategic has made includes security of land interests; drilling cost stability; finance and debt markets continuing to be receptive to financing the Company, the ability of the Company to monetize non-core assets and industry standard rates of geologic and operational success. Actual results could differ materially from those expressed in, or implied by, these forward-looking statements. Strategic disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Definitions of Resources
The following are excerpts from the definitions of resources and reserves, contained in Section 5 of the COGE Handbook, which is referenced by the Canadian Securities Administrators in National Instrument 51-101, "Standards of Disclosure for Oil and Gas Activities".
Discovered Petroleum Initially-In-Place (equivalent to Discovered Resources) - 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 of the volume is unrecoverable.
Undiscovered Petroleum Initially-In-Place (equivalent to Undiscovered Resources) - is that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of Undiscovered Petroleum Initially-In-Place is referred to as Prospective Resources; the remainder is classified as 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 may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by their economic status. There is no certainty that any portion of the contingent resources will be developed, nor whether it will be commercially viable to produce any portion of the resources.
Prospective Resources - are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity. There is no certainty that any portion of the prospective resources will be discovered and developed, nor whether it will be commercially viable to produce any portion of the resources.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Strategic Oil & Gas Ltd.
Gurpreet Sawhney, MBA, MSc., PEng.
President and CEO
403.767.2949
403.767.9122 (FAX)
Strategic Oil & Gas Ltd.
Aaron Thompson, CA
Chief Financial Officer
403.767.2952
403.767.9122 (FAX)
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Datum: 26.02.2015 - 10:00 Uhr
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