CALGARY, Alberta, Jan. 31, 2019 (GLOBE NEWSWIRE) — Prairie Provident Resources Inc. (“Prairie Provident”, “PPR” or the “Company”) is pleased to announce the results of our independent 2018 year-end reserves evaluation conducted by Sproule Associates Limited (“Sproule”) with an effective date of December 31, 2018 (the “Sproule Report”) and provide highlights from our year-end 2018 operations.
2018 RESERVES HIGHLIGHTS
Note:
RESERVES DETAIL
The strength of PPR’s strategy was demonstrated through 2018, as the Company closed on a corporate acquisition, successfully executed a $29 million capital program, and was able to quickly respond to volatility and unexpected changes in commodity prices, ultimately achieving record high reserves and production with solid capital efficiencies. Our capital program continued to target higher-value oil and liquids-weighted drilling locations and we remained active through the year with acquisitions, drilling and waterflood expansion; all of which contributed to the growth in PPR’s reserves base.
On November 21, 2018, we closed the acquisition of Marquee Energy Ltd. (“Marquee”), whose assets were focused primarily in the Michichi area targeting Banff light oil. This acquisition provided PPR with an expanded oil-weighted growth profile offering superior economies of scale and lower-risk development drilling opportunities. With the success realized in expanding the reserves and production through 2018, PPR is well positioned for growth with a strong portfolio of 1P and 2P economic locations.
The Marquee acquisition provides approximately 60 drill-ready locations. Future development of these locations is expected to unlock significant value for our shareholders, evidenced by our 1P and 2P NAV/share of $1.16 and $2.29, respectively, at December 31, 2018. See “Net Asset Value” and “Cautionary Statements” below.
Our drilling program at Princess in 2018 brought on five new wells with record initial production rates and identified a new Glauconite channel over prospective lands. At Princess, we added over 2 MMboe of 2P reserves in 2018.
At Evi, our development strategy, which has evolved over time in response to the Company’s commitment to value creation, is focused on expanding reserves, lowering decline rates and stabilizing production through waterflood. With the transition of Evi to waterflood, previously booked PUD locations in the area will not be drilled. Instead, as reflected in the Sproule Report, the development of these locations is expected to be replaced with waterflood expansion. The waterflood strategy at Evi has already proven successful with the addition of 363,500 boe of new 2P reserves in 2018 and approximately 850,000 boe of 2P reserves added over the last three years. PPR’s full transition to waterflood at Evi is reflected in technical revisions within the Sproule Report. The adjustment serves to better align the Company’s overall reserves with its ongoing asset development and capital allocation strategy.
At Wheatland, the shut-in of certain gas wells and underperformance of gas-weighted wells resulted in negative technical revisions in 2018. Given the lower operating netbacks from these gas wells, the net present value of future net revenue associated with these revisions is not significant.
The following presentation summarizes certain information contained in the Sproule Report, which was prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities(“NI 51-101”) and the definitions, standards, and procedures contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”). Sproule evaluated 100% of the Company’s reserves. The Sproule Report is based on forecast prices and costs and applies Sproule’s forecast escalated commodity price deck and foreign exchange rate and inflation rate assumptions as at December 31, 2018, as outlined in the table below entitled “Price Forecast”. Estimated future net revenue is stated without any provisions for interest costs, other debt service charges or general and administrative expenses, and after the deduction of royalties, operating costs, estimated well abandonment and reclamation costs and estimated future development costs.
Additional information regarding the Company’s reserves data and other oil and gas information will be included in the Company’s Annual Information Form for the year ended December 31, 2018 (the “AIF”), which will be filed under the Company’s issuer profile on SEDAR at www.sedar.com on or before April 1, 2019.
See also the “Cautionary Statements” below for further explanations and discussions.
Summary of Corporate Reserves(1)(2)(5)
The following table is a summary of the Company’s estimated reserves as at December 31, 2018, as evaluated in the Sproule Report.
| Reserves Category | Light and Medium Oil |
Heavy Oil | Conventional Natural Gas(3) (other than Solution Gas) |
Conventional Natural Gas (Solution Gas) |
Natural Gas Liquids |
Barrels of Oil Equivalent(4) |
| (Mbbl) | (Mbbl) | (MMcf) | (MMcf) | (Mbbl) | (Mboe) | |
| Proved | ||||||
| Developed Producing | 6,924 | 313 | 9,208 | 11,025 | 338 | 10,946 |
| Developed Non-producing | 359 | 9 | 488 | 10 | 3 | 453 |
| Undeveloped | 7,803 | 124 | 0 | 15,953 | 374 | 10,960 |
| Total Proved | 15,085 | 446 | 9,696 | 26,988 | 714 | 22,360 |
| Probable | 7,413 | 552 | 3,234 | 15,806 | 365 | 11,504 |
| Total Proved plus Probable | 22,498 | 998 | 12,930 | 42,795 | 1,080 | 33,863 |
Notes:
Net Present Values of Future Net Revenue Before Income Taxes Discounted at (%/year) (1)(2)(3)(4)(5)
The following table is a summary of the estimated net present values of future net revenue (before income taxes) associated with Prairie Provident’s reserves as at December 31, 2018, discounted at the indicated percentage rates per year, as evaluated in the Sproule Report.
| Reserves Category | 0% | 5% | 10% | 15% | 20% | ||||
| (MM$) | (MM$) | (MM$) | (MM$) | (MM$) | |||||
| Proved | |||||||||
| Developed Producing | 231.0 | 199.7 | 174.8 | 155.6 | 140.4 | ||||
| Developed Non-Producing | 14.2 | 11.3 | 9.3 | 7.9 | 6.8 | ||||
| Undeveloped | 232.6 | 164.7 | 117.3 | 83.9 | 60.0 | ||||
| Total Proved | 477.8 | 375.6 | 301.4 | 247.4 | 207.2 | ||||
| Probable | 348.5 | 253.8 | 193.6 | 153.5 | 125.4 | ||||
| Total Proved plus Probable | 826.3 | 629.4 | 495.0 | 400.8 | 332.6 | ||||
Notes:
Price Forecast(1)
The following table summarizes Sproule’s commodity price forecast and foreign exchange rate and inflation rate assumptions as at December 31, 2018, as applied in the Sproule Report, for the next five years.
| Year | Exchange Rate | WTI @ Cushing |
Canadian Light Sweet 40º API |
Western Canada Select 20.5º API |
Edmonton Butane |
Natural gas AECO-C spot |
| $US/$C | (US$/bbl) | (C$/bbl) | (C$/bbl) | (C$/bbl) | (C$/MMbtu) | |
| 2019 | 0.77 | 63.00 | 75.27 | 59.47 | 40.91 | 1.95 |
| 2020 | 0.80 | 67.00 | 77.89 | 62.31 | 50.25 | 2.44 |
| 2022 | 0.80 | 70.00 | 82.25 | 67.45 | 56.88 | 3.00 |
| 2022 | 0.80 | 71.40 | 84.79 | 69.53 | 58.01 | 3.21 |
| 2023 | 0.80 | 72.83 | 87.39 | 71.66 | 59.17 | 3.30 |
Note:
Reconciliation of Company Gross Reserves Based on Forecast Prices and Costs(2)(3)
| Mboe | |||
| FACTORS | Proved | Probable | Proved plus Probable |
| December 31, 2017 | 14,350 | 6,327 | 20,678 |
| Acquisitions | 10,977 | 5,565 | 16,542 |
| Dispositions | (84) | (35) | (118) |
| Drilling (Extensions and Improved Recovery(1)) | 1,445 | 741 | 2,187 |
| Discoveries | 212 | 65 | 277 |
| Technical Revisions | (2,396) | (1,124) | (3,520) |
| Pricing (Economic Factors) | (172) | (37) | (208) |
| Production | (1,974) | 0 | (1,974) |
| December 31, 2018 | 22,360 | 11,504 | 33,863 |
Notes:
Future Development Costs (“FDC”)
The following table provides a summary of the estimated FDC required to bring Prairie Provident’s 1P and 2P undeveloped reserves to production, as reflected in the Sproule Report, which costs have been deducted in Sproule’s estimation of future net revenue associated with such reserves.
| Total | Total Proved | |
| Future Development Costs (MM$)(1) | Proved | plus Probable |
| 2019 | 46.9 | 47.8 |
| 2020 | 81.6 | 111.5 |
| 2021 | 29.3 | 62.9 |
| 2022 | 38.3 | 46.5 |
| Remainder | 0.06 | 0.1 |
| Total FDC undiscounted | 196.2 | 268.8 |
| Total FDC discounted at 10% | 166.3 | 225.5 |
Note:
Capital Efficiencies(2)(4)
In 2018, PPR executed a successful drilling program focused predominantly on oil targets. This was supplemented by key acquisitions that provided incremental growth opportunities.
During 2018, PPR’s 1P and 2P FD&A costs were $16.51/boe and $12.54/boe, respectively, including change in FDC. The following table sets out our calculation of FD&A costs. See also “Cautionary Statements – Finding, Development and Acquisition costs” below.
| Finding, Development & Acquisition Costs (2018) | Total Proved | Total Proved plus Probable |
| Exploration, development and acquisition capital(1) (MM$) | 72.5 | 72.5 |
| Change in FDC(3) (MM$) | 92.3 | 117.6 |
| Total FD&A costs, including change in FDC (MM$) | 164.8 | 190.1 |
| Total reserves additions, including revisions (Mboe) | 9,983.3 | 15,159.6 |
| FD&A costs, including change in FDC ($/boe) | 16.51 | 12.54 |
Notes:
Net Asset Value
The following table sets out a calculation of NAV based on the estimated before-tax estimated net present value of future net revenue (discounted at 10%) (“NPV10 BT”) associated with our PDP, 1P and 2P reserves, as evaluated in the Sproule Report, our estimated long-term debt, and the number of PPR common shares outstanding, all as of December 31, 2018. See also “Cautionary Statements – Net Asset Value” below.
| PDP | 1P | 2P | |
| NPV10 BT (MM$) | 174.8 | 301.4 | 495.0 |
| Estimated long-term debt, less cash collateralized letters of credit (unaudited) (MM$) |
101.5 | 101.5 | 101.5 |
| Net Asset Value (MM$) | 73.3 | 200.0 | 393.6 |
| Basic shares outstanding (MM) | 171.9 | 171.9 | 171.9 |
| Estimated NAV/share ($) | 0.43 | 1.16 | 2.29 |
OPERATIONAL UPDATE
The Company’s full-year 2018 production volumes of 5,372 boe/d were at the midpoint of our guidance of 5,200 to 5,600 boe/d. Extremely wide oil differentials and weak realized oil prices in Q4/18 that impacted the entire western Canadian oil and gas industry led PPR to defer some activities into Q1/19. As a result, Q4/18 production volumes averaged 5,937 boe/d, lower than previously anticipated, although our full year production remained within guidance. The Company is currently producing approximately 6,300 to 6,400 boe/d, which is expected to increase to approximately 7,000 boe/d as PPR undertakes continued production optimization, and completion and tie-in of the two Slave Point wells at Evi through Q1/19.
As a result of the activity and capital program completed during 2018, Prairie Provident is well positioned for further success in 2019 with predictable funds flow from our low-decline oil assets and an attractive inventory of drilling locations. Our three core areas of Michichi/Wayne, Princess and Evi all offer light/medium oil exposure and focused, lower-risk capital allocation opportunities, and we benefit from a relatively low base decline rate of approximately 18%. With over 90% of our production operated and an average working interest exceeding 98% in our three core areas, PPR maintains control over the timing and pace of our development, enabling the Company to optimally allocate capital in order to maximize value for shareholders.
Given the widening of Canadian / US oil differentials and weaker commodity prices in Q4/18, we have elected to finalize our 2019 capital budget and operational guidance in late February, as we anticipate having greater clarity at that time on the outlook for the balance of the year. Despite the recent challenging environment for our industry, our lenders remain supportive of the industry and PPR specifically as we continue to execute our corporate strategy.
ABOUT PRAIRIE PROVIDENT:
Prairie Provident is a Calgary-based company engaged in the exploration and development of oil and natural gas properties in Alberta. The Company’s strategy is to grow organically in combination with accretive acquisitions of conventional oil prospects, which can be efficiently developed. Prairie Provident’s operations are primarily focused at the Michichi/Wayne and Princess areas in Southern Alberta targeting the Banff, the Ellerslie and the Lithic Glauconite formations, along with an early-stage waterflood project at our Evi area in the Peace River Arch. Prairie Provident protects its balance sheet through an active hedging program and manages risk by allocating capital to opportunities offering maximum shareholder returns.
