Highlights include:
-- Proved reserves of 66 million barrels of oil equivalent; an increase of 4% year over year; -- Total proved plus probable reserves of 297 million barrels of oil equivalent; we replaced 277% of our 2014 production; -- Net present value, before tax, discounted at 10% ("BTNPV10"), of our proved reserves increased 34% to $982 million and the NPV10 of our proved plus probable reserves increased 22% to $2.7 billion; -- A total of 616 million barrels of contingent resources (best estimate) assigned to our 3 core properties with a BTNPV10 of $2.0 billion; -- Our largest property is the Blackrod SAGD project with proved plus probable reserves of 181 million barrels and best estimate contingent resources of 566 million barrels of oil, with potential production reaching 80,000 barrels of oil per day; -- Our Onion Lake thermal project was assigned proved reserves of 50 million barrels of oil and proved plus probable reserves of 85 million barrels, with peak production potential of 12,000 barrels of oil per day. An additional 32 million barrels of best estimate contingent resource was attributed to the Onion Lake thermal areas. The first 6,000 per day barrel phase of the Onion Lake thermal project is expected to be completed in mid-2015; -- Q4 2014 production averaged 9,639 boe/day; full year production of 9,287 boe/day.
John Festival commenting on the 2014 reserves evaluation indicated that "over the last three years the potential of our three core properties began to be recognized in our independent reserves and contingent resource assessments. The net present value (discounted at 10%, BT) Sproule assigned to our proved reserves represents $2.93 per common share and on a proved plus probable basis the value represents $7.97 per share. The value Sproule has assigned to best estimate contingent resources represents an additional $5.32 per share.
Our objective going forward is to convert this potential into production and cash flow. We took a big step forward in that regard in 2014 with the commencement of construction of the first phase of the Onion Lake thermal EOR project."
Oil and Gas Reserves
The following tables summarize certain information contained in the independent reserves report prepared by Sproule Unconventional Limited ("Sproule") as of December 31, 2014. The report was 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"). Additional reserve information as required under NI 51-101 will be included in the Company's Annual Information Form which will be filed on SEDAR on or before March 31, 2015. It should not be assumed that the net present value of reserves estimated by Sproule represents the fair market value of these reserves.
Summary of Oil and Gas Reserves
(Company interest, before Heavy Bitumen Total Natura 2014 2013 royalties) Oil Crude l Total Total Oil Gas -------------------------------------------------------------------------------- (Mbbl) (Mbbl) (Mbbl) (MMcf) (MBoe) (MBoe) --------------------------------------------------------------------------------
Proved developed producing 7,416 1,309 8,725 299 8,766 8,826 Proved developed 2,107 0 2,107 43 2,114 2,205 non-producing Proved undeveloped 54,835 429 55,264 65 55,275 52,798 -------------------------------------------------------------------------------- Total proved 64,358 1,739 66,097 407 66,165 63,829 Probable 50,947 179,456 230,403 319 230,456 226,777 -------------------------------------------------------------------------------- Total proved plus probable 115,305 181,195 296,500 726 296,621 290,606 -------------------------------------------------------------------------------- Notes: (1) BOE's may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio of 6 Mcf: 1 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. (2) Based on Sproule's December 31, 2014 forecast prices (3) Columns may not add due to rounding
Net Present Value of Reserves
0% 5% 10% 15% 20% -------------------------------------------------------------------------------- ($000) Before Tax Proved Developed producing 207,776 183,390 164,207 148,784 136,152 Developed non-producing 76,455 58,381 45,453 35,995 28,936 Undeveloped 2,165,100 1,222,461 772,355 530,909 387,691 -------------------------------------------------------------------------------- Total proved 2,449,330 1,464,231 982,015 715,688 552,779 Probable 7,607,464 3,373,789 1,691,518 920,130 525,568 -------------------------------------------------------------------------------- Total proved plus 10,056,794 4,838,020 2,673,532 1,635,818 1,078,348 probable -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- After Tax Proved Developed producing 207,776 183,390 164,207 148,784 136,152 Developed non-producing 76,455 58,381 45,453 35,995 28,936 Undeveloped 1,697,572 980,743 634,508 445,784 331,721 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total proved 1,981,802 1,222,514 844,168 630,563 496,809 Probable 5,672,610 2,472,061 1,208,087 632,787 341,412 -------------------------------------------------------------------------------- Total proved plus 7,654,413 3,694,575 2,052,255 1,263,350 838,221 probable --------------------------------------------------------------------------------
Notes:
1. Based on Sproule's December 31, 2014 forecast prices 2. Columns may not add due to rounding
Estimated Future Development Capital
The following table summarizes the future development capital ("FDC") Sproule estimates is required to bring the proved, and proved plus probable reserves on production.
($ Millions) Total Proved Total Proved + Probable ------------------------------------------------------------------ ------------------------------------------------------------------ 2015 61.5 62.7 2016 27.3 136.7 2017 22.8 130.6 2018 28.3 96.0 2019 28.1 352.7 Remainder 329.1 1,780.8 ------------------------------------------------------------------ ------------------------------------------------------------------ Total FDC undiscounted 497.1 2,559.5 Total FDC discounted at 10% 243.1 1,129.2
Reconciliation of Changes in Reserves
The following table summarizes the changes in the Company's share of oil and natural gas reserves (before royalties) from December 31, 2013 to December 31, 2014.
Oil, Heavy Oil & Bitumen Natural gas BOE -------------------------------------------------------------------------------- Proved Probable Total Proved Probable Total Total -------------------------------------------------------------------------------- (Mbbls) (Mbbls) (Mbbls) (MMcf) (MMcf) (MMcf) (Mboe) Balance, Dec 31, 63,804 226,754 290,558 154 137 291 290,606 2013 Production (3,241) 0 (3,241) (904) 0 (904) (3,391) Extensions 481 397 878 6 0 6 878 Discoveries 0 0 0 0 0 0 0 Technical 5,075 3,241 8,316 1,161 173 1,334 8,538 revisions Improved recovery 0 0 0 0 0 0 0 Acquisitions 0 0 0 0 0 0 0 Dispositions 0 0 0 0 0 0 0 Economic factors (22) 11 (11) (10) 10 0 (11) -------------------------------------------------------------------------------- Balance, Dec 31, 66,097 230,403 296,500 407 319 726 296,621 2014 --------------------------------------------------------------------------------
Notes: (1) BOE's may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio of 6 Mcf: 1 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. (2) Columns may not add due to rounding
The pricing assumptions used in the Sproule evaluation are summarized below.
Pricing Assumptions
Year WTI Canadian Light Western Alberta Inflation Exchange Cushing Sweet Crude Canadian AECO-C rate rate 40° API 40° API Select Spot 20.5° API -------------------------------------------------------------------------------- (US$/bb (CDN$/bbl) (CDN$/bbl) (CDN$/MMB (%/yr) (US$/Cdn$) l) tu) -------------------------------------------------------------------------------- 2015 65.00 70.35 60.50 3.32 1.5 0.85 2016 80.00 87.36 75.13 3.71 1.5 0.87 2017 90.00 98.28 84.52 3.90 1.5 0.87 2018 91.35 99.75 85.79 4.47 1.5 0.87 2019 92.72 101.25 87.07 5.05 1.5 0.87 2020 94.11 103.85 89.31 5.13 1.5 0.87 2021 95.52 105.40 90.65 5.22 1.5 0.87 2022 96.96 106.99 92.01 5.31 1.5 0.87 2023 98.41 108.59 93.39 5.40 1.5 0.87 2024 99.89 110.22 94.79 5.49 1.5 0.87 2025 101.38 111.87 96.21 5.58 1.5 0.87 Escalation rate of 1.5% thereafter
Notes:
1. The pricing assumptions were provided by Sproule Unconventional Limited 2. None of the Company's future production is subject to a fixed or contractually committed price.
Definitions:
1. "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. 2. "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. 3. "Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production. 4. "Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty. 5. "Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown. 6. "Undeveloped" reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned. 7. The Net Present Value (NPV) is based on Sproule Forecast Pricing and costs. The estimated NPV does not necessarily represent the fair market value of our reserves. There is no assurance that forecast prices and costs assumed in the Sproule evaluations will be attained, and variances could be material.
Contingent Resources
The following table summarizes certain information contained in the contingent resource evaluations prepared by Sproule as of December 31, 2014. The reports were independently prepared in accordance with definitions, standards and procedures contained in the COGE Handbook.
It should not be assumed that the estimates of recovery, production, and net revenue presented in the tables below represent the fair market value of the Company's contingent resources. There is no assurance that the forecast prices and cost assumptions will be realized and variances could be material. The recovery and production estimates of the Company's contingent resources provided herein are only estimates and there is no guarantee that the estimated contingent resources will be recovered or produced. Actual contingent resources may be greater than or less than the estimates provided here. There are certain contingencies which currently prevent the classification of these contingent resources as reserves. Information on these contingencies is provided in the footnotes to the tables below. There is no certainty that it will be commercially viable for the Company to produce any portion of the contingent resources on any of its properties.
Summary of Best Estimate (P50) Contingent Resource - By Property (1)(3)
Project Gross(2) Net Present Values of Before Tax Future Net Heavy Revenue Oil//Bitumen as of December 31, 2014 Contingent Resources - Best Estimate Discounted at -------------------------------------------------------------------------------- 0% 5% 10% 15% 20% -------------------------------------------------------------------------------- (Mboe) ($000) -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Blackrod 566,135 15,862,704 4,825,694 1,594,391 520,500 131,717 Onion Lake 33,512 1,444,215 611,407 292,335 154,221 87,368 Mooney 16,166 630,072 309,848 160,492 86,374 47,673 -------------------------------------------------------------------------------- Total 615,813 17,936,991 5,746,949 2,047,218 761,095 266,758 --------------------------------------------------------------------------------
Notes:
1. These volumes are arithmetic sums of multiple estimates of contingent resources, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of resources and appreciate the differing probabilities of recovery associated with each class as explained. 2. Contingent Resources are defined in the COGE Handbook as 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 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. 3. There are three categories in evaluating contingent resources: Low Estimate, Best Estimate and High Estimate. Best estimate (P50) is a classification of estimated resources described in the COGE Handbook as being considered to be the best estimate of the quantity that will be actually 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% probability that the quantities actually recovered will equal or exceed the best estimate. 4. The estimates of contingent resources (best estimate) and future net revenue for individual properties may not reflect the same confidence levels as estimates of contingent resources (best estimate) and future net revenues for all properties, due to the effects of aggregation. 5. " Gross" means the Company's working interest share in the contingent resources of bitumen and heavy oil before deducting royalties. The Company has a 100% working interest at Blackrod and Mooney, and a 79.795 to 100% working interest at Onion Lake. 6. The amounts included in these tables do not include the volume and value of BlackPearl's proved and probable reserves previously assigned by Sproule to these properties. 7. The contingencies in the Sproule Report associated with the Company's Blackrod contingent resources are due to the following: (a)the requirement for more evaluation drilling, as required by the regulatory process, to define the reservoir characteristics to assist in the implementation and operation of the SAGD process (b)the absence of submission of an application to expand the commercial SAGD development; and (c)the uncertainty of timing of production and development. 8. The contingencies in the Sproule Report associated with the Company's Onion Lake contingent resources are due to the following: (a)the absence of approval to extend the SAGD development area (b)the requirement for more evaluation drilling to define the reservoir characteristics of the resource to assist in the implementation and operation of the SAGD recovery process; (c)the uncertainty of company commitment for expansion of the commercial SAGD development; and (d)the uncertainty of timing of production and development. 9. The contingencies in the Sproule Report associated with the Company's Mooney contingent resources are due to the following: (a) the requirement for more evaluation wells to further define reservoir and fluid characteristics; and (b)the uncertainty of timing of production and development of the entire field.
Production Update
BlackPearl's Q4 2014 oil and gas sales volumes were 9,639 boe per day, a 4% increase over production during the third quarter. The increase in fourth quarter production is mainly attributable to additional primary development drilling at Onion Lake. At Onion Lake, we drilled 11 conventional wells during the third quarter which began to contribute to production in the fourth quarter.
Three months ended Year ended December 31 December 31 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Production by Area (boe/d) 2014 2013 2014 2013 ---------------------------------------------------------------------- Onion Lake 4,651 5,186 4,263 4,797 Mooney 3,236 3,837 3,469 3,685 John Lake 1,109 1,066 1,067 898 Other 120 103 108 114 Blackrod 523 262 380 236 ---------------------------------------------------------------------- Total production 9,639 10,454 9,287 9,730 ----------------------------------------------------------------------
Other
The Company is planning to release its 2014 year-end financial and operating results on February 26, 2015.
At December 31, 2014, the Company had 335,638,226 common shares outstanding.
Forward-Looking Statements
This release contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as "anticipate", "anticipated", "planning", "planned", "potential", "could", "continue", "continued", "continuing", "estimate", "estimates", "estimated", "forecast", "likely", "expect", "expected", "may", "intend", "intends", "intended", "intention", "deferred", "successful", "will", "project", "timing", "in the event", "move toward", "should", "scheduled", "outlook" or similar words suggesting future outcomes.
In particular, but without limiting the foregoing, this release contains forward-looking statements pertaining to, the volumes and estimated value of BlackPearl's proved and probable reserves, the volumes and estimated value of BlackPearl's contingent resources, potential production levels for the Blackrod SAGD project and the Onion Lake thermal project, the net present value per common share of our proved reserves, proved plus probable reserves and contingent resources and the estimate for future development capital.
The forward-looking information is based on expectations and assumptions by management regarding future production levels, future oil and natural gas prices, continuation of existing tax, royalty and regulatory regimes, foreign exchange rates, estimates of future operating costs, timing and amount of capital expenditures, performance of existing and future wells, the ability to obtain financing on acceptable terms, availability of skilled labour and drilling and related equipment, general economic and financial market conditions and the ability to market oil and natural gas successfully to current and new customers.
Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Accordingly, undue reliance should not be placed on these forward-looking statements. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will be realized. Actual results will differ, and the differences may be material and adverse to the Company and its shareholders.
By their nature, forward-looking statements involve numerous known and unknown risks and uncertainties that contribute to the possibility that actual results will differ from those anticipated in the forward looking statements. These risks include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent, general economic, market and business conditions, volatility of commodity inputs, substantial capital requirements, customary conditions including receipt of necessary regulatory and stock exchange approvals on the issuance of common shares, uncertainties inherent in estimating quantities of reserves and resources, extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time, the need to obtain regulatory approvals on projects before development commences, environmental risks and hazards and the cost of compliance with environmental regulations, aboriginal claims, inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions, financial loss associated with derivative risk management contracts, potential cost overruns, variations in foreign exchange rates, variations in interest rates, diluent and water supply shortages, competition for capital, equipment, new leases, pipeline capacity and skilled personnel, uncertainties inherent in the SAGD bitumen and ASP recovery process, credit risks associated with counterparties, the failure of the Company or the holder of licences, leases and permits to meet requirements of such licences, leases and permits, reliance on third parties for pipelines and other infrastructure, changes in royalty regimes, failure to accurately estimate abandonment and reclamation costs, inaccurate estimates and assumptions by management, effectiveness of internal controls, the potential lack of available drilling equipment and other restrictions, failure to obtain or keep key personnel, title deficiencies with the Company's assets, geo-political risks, risks that the Company does not have adequate insurance coverage, risk of litigation and risks arising from future acquisition activities. Readers are also cautioned that the foregoing list of factors is not exhaustive. Further information regarding these risk factors may be found under "Risk Factors" in the Annual Information Form.
The forward-looking statements contained in this release are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
For further information, please contact:
John Festival - President and Chief Executive Don Cook - Chief Financial Officer Officer Tel.: (403) 215-8313 Tel: (403) 215-8313 Robert Eriksson - Investor Relations Sweden Tel.: +46 8 545 015 50
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