Crocotta Energy Announces Strong Reserve Growth
CALGARY, ALBERTA -- (Marketwired - Mar 25, 2014) - Crocotta Energy Inc. ("Crocotta") (TSX:CTA) is pleased to announce its 2013 year-end reserves as independently evaluated by GLJ Petroleum Consultants Ltd., in accordance with National Instrument 51-101 ("NI 51-101").2013 Highlights
- Increased proved plus probable reserves by 21% to 46.3 million barrels of oil equivalent ("boe")
- Increased proved reserves by 29% to 28.6 million boe
- Increased reserves per share by 12%
- Reserve Replacement of 355% on a proved plus probable basis and 301% on a proved basis
- Achieved all-in finding, development and acquisition costs ("FD&A") including changes in future development costs ("FDC") on a proved plus probable basis of $20.48 per boe ($20.96 per boe on a proved basis)
- Achieved three-year all-in FD&A including changes in FDC on a proved plus probable basis of $14.84 per boe ($18.20 per boe on a proved basis)
- Reserve life index of 13.7 years on a proved plus probable basis (8.5 years proved) based on Q4 2013 average production of 9,233 boepd
- All FDC booked can be funded within projected cash flow
Capital and Reserve Discussion
Crocotta's capital was spent on achieving the following goals for 2013:
- Being a low cost operator and improving netbacks
- Proving up Edson Cardium and Dawson-Sunrise Montney
- Expanding opportunity base within core areas and adding lands that could develop into new core areas
Facilities and pipeline capital totaled $23.7 million (19% of Capex) to expand both Edson and Montney facilities and gathering systems. At Edson, Crocotta signed an agreement to move substantially all its product in the area to the Alliance Pipeline as well as focusing capital to reduce operating costs. The benefits were substantial with an estimated increase in netback by approximately $4 per boe by Q413. Edson operating costs in Q413 were $4.00 per boe (excluding 2012 adjustments booked in Q413 that relate to a third party processing facility). While the commitment to improving netback did not necessarily result in more reserves, it did contribute materially to the value of the Edson asset that is approximately $100 million higher than year-end 2012.
Montney facilities were commissioned in late 2013 which reduced costs and increased liquid yields. By Q413, area Montney costs had dropped to $6.30 per boe from $10.50 per boe in Q1-Q313 and netbacks improved to $23.65 per boe from $13.85 per boe.
Crocotta's second goal was to prove up both the Cardium at Edson and the Montney at Dawson-Sunrise. Approximately $58 million (45% of capital) was spent on proving up and expanding the Cardium at Edson. As expected, reserve increases at Edson were predominantly in the Cardium and viewed by Crocotta as conservative given the early nature of production on the play. The Montney saw some increases but mainly saw movement from probable reserves to proved reserves as production in the area has matured. We believe the Montney has potential to materially add reserves in the future as we delineate our lands with future drilling. Overall, 5.2 mmboes were either moved from the probable category to the proved category or went from unbooked directly to proved. This resulted in a substantial increase to the lower-risk proved category.
Approximately $13.2 million (10.3% of Capex) was spent on expanding the land base and drilling new areas. Capital was spent approximately even on core and non-core areas and resulted in increasing the opportunity base within core areas and adding one potential new area to develop. Although initial reserve and value adds may not be material, we view the expansion of the opportunity base as a key to long-term growth.
Finding and Development Costs ("F&D")
All-in F&D costs including future development costs ("FDC") were $20.96 per boe on a Proved basis and $20.48 Proved plus Probable basis. The three-year comparative which normalizes the period costs was $18.20 on a Proved basis and $14.84 on a Proved plus Probable basis.
F&D costs were affected by a number of factors including the following:
- 3.8 mmboe of probable undeveloped reserves booked in 2012 were converted to proved reserves in 2013. Capital spent to convert these reserves did not result in an increase in overall reserves (just moving them to the lower risk category)
- 0.823 mmboe of P+P reserves that related to non-core properties were written off. With Crocotta's focus being on core properties, certain projects on non-core properties were written off as they are unlikely to be completed in the foreseeable future. These revisions affected finding costs negatively by $1.39 per boe on a P+P basis.
- Certain infrastructure costs (see above) were incurred during the period that affect all future projects as well as current projects. Long-term F&D will normalize these costs but the 2013 year was negatively affected.
Crocotta has presented F&D costs below both including and excluding dispositions. While NI 51-101 requires that the effects of acquisitions and dispositions be excluded, Crocotta has calculated both with and without acquisitions and dispositions as acquisitions and dispositions can have a significant impact on a company's ongoing reserve replacement costs and that excluding these amounts could result in an inaccurate portrayal on a company's cost structure.
| 2013 | 2012 | 3 Year Average | ||||||||
| Proved & | Proved & | Proved & | ||||||||
| ($000's, except were noted) | Proved | Probable | Proved | Probable | Proved | Probable | ||||
| Finding & Development Costs (excluding net acquisitions/ dispositions) | ||||||||||
| Exploration and Development Expenditures | 127,270 | 127,270 | 98,548 | 98,548 | 318,900 | 318,900 | ||||
| Change in FDC (1) | 73,423 | 104,068 | 17,020 | 29,185 | 158,848 | 240,425 | ||||
| Finding and Development Costs excluding Net Acquisitions/ Dispositions | ||||||||||
| - Including FDC | 200,693 | 231,338 | 115,568 | 127,733 | 477,748 | 559,325 | ||||
| All-in Finding and Development Costs | ||||||||||
| (including net acquisitions/ dispositions) | ||||||||||
| Exploration and Development Expenditures | 127,270 | 127,270 | 98,548 | 98,548 | 318,900 | 318,900 | ||||
| Net Acquisitions (Dispositions) (including related capital) | - | - | 5,406 | 5,406 | (7,442 | ) | (7,442 | ) | ||
| Exploration and Development Expenditures including net acquisitions (dispositions) | 127,270 | 127,270 | 103,954 | 103,954 | 311,458 | 311,458 | ||||
| Change in FDC | 73,423 | 104,068 | 17,020 | 29,185 | 158,848 | 240,425 | ||||
| All-in Finding and Development Costs - Including FDC | 200,693 | 231,338 | 120,974 | 133,139 | 470,306 | 551,883 | ||||
| Reserve Additions (Mboe) | ||||||||||
| Exploration and Development | 9,573 | 11,296 | 6,564 | 10,307 | 26,055 | 38,190 | ||||
| Net Acquisitions/ Dispositions | - | - | 665 | 807 | (220 | ) | (997 | ) | ||
| Total Reserve Additions | 9,573 | 11,296 | 7,229 | 11,114 | 25,835 | 37,193 | ||||
| Finding and Development Costs excluding net acquisitions/ dispositions ($/boe) | ||||||||||
| Excluding FDC | 13.29 | 11.27 | 15.01 | 9.56 | 12.24 | 8.35 | ||||
| Including FDC | 20.96 | 20.48 | 17.61 | 12.39 | 18.34 | 14.65 | ||||
| All-in Finding and Development Costs ($/boe) | ||||||||||
| Excluding FDC | 13.29 | 11.27 | 14.38 | 9.35 | 12.06 | 8.37 | ||||
| Including FDC | 20.96 | 20.48 | 16.73 | 11.98 | 18.20 | 14.84 | ||||
- Future development capital ("FDC") expenditures required to recover reserves estimated by GLJ. The aggregate of the exploration and development costs incurred in the most recent financial period and the change during that period in estimated future development costs generally may not reflect total finding and development costs related to reserve additions for that period.
Netback and Recycle Ratio
Crocotta has been able to significantly improve its netback through various initiatives in 2013 that increased the net revenue stream and reduced operating costs. The effect of Crocotta's efforts were visible in Q413 where netbacks increased to $28.82 per boe (b efore 2012 non-recurring adjustments of $890,000) from $24.21 per boe in Q1-Q313. The effect at Edson was even more dramatic as netbacks increased to $30.88 per boe (from $25.37 per boe in Q1-Q313) due to operating cost being reduced to $4.00 per boe and net revenues increasing from Aux Sable processing arrangement.
At Dawson-Sunrise, Crocotta started producing through its own facility in the fall of 2013. Operating costs were reduced to $6.30 per boe in Q413 from $10.50 in Q1-Q313. Liquids yield also increased significantly and contributed to the increase in Q413 netback to $23.65 per boe as compared to $13.85 per boe in Q1-Q313.
The following chart shows netback and recycle ratio using Q413 netbacks (excluding a 2012 gas plant adjustment of $890,000 booked in Q413 financials) when compared to one and three year finding costs (All-in including FDC on a P+P basis). We have also shown Edson recycle ratio using Q413 Edson netback compared to one and three year finding costs.
| | Crocotta Q413 Netback and 3 Year F&D | Crocotta Q413 Netback and 2013 F&D | Edson Q413 Netback and 3- year F&D | Edson Q413 Netback and 2013 F&D |
| Netback $ per Boe | 28.82 | 28.82 | 30.88 | 30.88 |
| F&D - $ per Boe | 14.84 | 20.48 | 14.84 | 20.48 |
| Recycle Ratio | 1.9 | 1.4 | 2.1 | 1.5 |
Reserve Life Index
The Company's Reserve Life Index presented below is based on Q4 2013 average production of 9,233 boepd.
| Reserve Category | Reserve Life Index |
| Proved plus Probable Reserves | 13.7 |
| Proved | 8.5 |
Reserves Summary
Crocotta's December 31, 2013 reserves as prepared by the independent reserves evaluation firm GLJ Petroleum Consultants Ltd. ("GLJ") and based on the GLJ (2014-01) future price forecast are as follows:
Light/Medium Oil | Heavy Oil | Natural Gas Liquids | Natural Gas | Barrels of Oil Equivalent | |||||||
| Company Interest (Mbbl) | Net (Mbbl) | Company Interest (Mbbl) | Net (Mbbl) | Company Interest (Mbbl) | Net (Mbbl) | Company Interest (Mmcf) | Net (Mmcf) | Company Interest (Mboe) | Net (Mboe) | ||
| Proved | |||||||||||
| Producing | 1,110 | 863 | 0 | 0 | 2,252 | 1,914 | 51,946 | 43,326 | 12,019 | 9,998 | |
| Developed Non-producing | 33 | 31 | 50 | 45 | 154 | 133 | 6,208 | 5,493 | 1,272 | 1,124 | |
| Undeveloped | 1,079 | 949 | 54 | 44 | 2,284 | 2,017 | 71,285 | 61,138 | 15,298 | 13,201 | |
| Total proved | 2,222 | 1,843 | 104 | 90 | 4,690 | 4,064 | 129,439 | 109,958 | 28,589 | 24,323 | |
| Probable | 1,466 | 1,186 | 56 | 47 | 2,865 | 2,481 | 79,671 | 66,765 | 17,665 | 14,842 | |
| Total proved & probable | 3,688 | 3,029 | 160 | 137 | 7,555 | 6,546 | 209,110 | 176,723 | 46,254 | 39,165 | |
Notes:
- "Company Interest" reserves means Crocotta's working interest (operating and non-operating) share before deduction of royalties and including any royalty interest of Crocotta.
- "Net" reserves means Crocotta's working interest (operated and non-operated) share after deduction of royalties, plus Crocotta's royalty interest in reserves.
- Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil.
- Numbers may not add due to rounding.
Reserves Values
The estimated future net revenues before taxes associated with Crocotta's reserves effective December 31, 2013 and based on the GLJ (2014-01) future price forecast are summarized in the following table:
| ($000s) | 0% DCF | 5% DCF | 10% DCF | 15% DCF | |
| Proved | |||||
| Producing | 282,361 | 236,167 | 204,375 | 181,206 | |
| Developed Non-producing | 26,503 | 18,591 | 14,430 | 11,883 | |
| Undeveloped | 283,914 | 194,624 | 139,874 | 103,783 | |
| Total proved | 592,778 | 449,382 | 358,679 | 296,872 | |
| Probable | 446,990 | 267,644 | 178,046 | 126,582 | |
| Total proved & probable | 1,039,768 | 717,026 | 536,725 | 423,454 | |
Price Forecast
The GLJ (2014-01) price forecast for the next 5 years is as follows:
Year | WTI @ Cushing ($US / Bbl) | Edmonton Light ($Cdn / Bbl) | Natural Gas at AECO ($Cdn / Mmbtu) |
| 2014 | 97.50 | 92.76 | 4.03 |
| 2015 | 97.50 | 97.37 | 4.26 |
| 2016 | 97.50 | 100.00 | 4.50 |
| 2017 | 97.50 | 100.00 | 4.74 |
| 2018 | 97.50 | 100.00 | 4.97 |
Forward-Looking Information
This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "should", "believe", "intends", "forecast", "plans", "guidance" and similar expressions are intended to identify forward-looking statements or information.
More particularly and without limitation, this document contains forward looking statements and information relating to the Company's oil, NGLs and natural gas production and reserves and reserves values, capital programs, and oil, NGLs, and natural gas commodity prices. The forward-looking statements and information are based on certain key expectations and assumptions made by the Company, including expectations and assumptions relating to prevailing commodity prices and exchange rates, applicable royalty rates and tax laws, future well production rates, the performance of existing wells, the success of drilling new wells, the availability of capital to undertake planned activities and the availability and cost of labour and services.
Although the Company believes that the expectations reflected in such forward-looking statements and information are reasonable, it can give no assurance that such expectations will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to production rates, costs and expenses, commodity price and exchange rate fluctuations, marketing and transportation, environmental risks, competition, the ability to access sufficient capital from internal and external sources and changes in tax, royalty and environmental legislation. The forward-looking statements and information contained in this document are made as of the date hereof for the purpose of providing the readers with the Company's expectations for the coming year. The forward-looking statements and information may not be appropriate for other purposes. The Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
BOE Conversions
BOE's may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Contact
Crocotta Energy Inc.
Robert Zakresky, President and Chief Executive Officer
(403) 538-3736
Crocotta Energy Inc.
Nolan Chicoine, Vice President, Finance and Chief Financial Officer
(403) 538-3738
Crocotta Energy Inc.
(403) 538-3737
(403) 538-3735
www.crocotta.ca
