Emerge Oil & Gas Inc.

March 11, 2010 17:35 ET

Emerge Releases 2009 Year-End Reserves Information

CALGARY, ALBERTA--(Marketwire - March 11, 2010) - Emerge Oil & Gas Inc. ("Emerge" or the "Company") (TSX:EME) is pleased to report its petroleum and natural gas reserves information for the year ended December 31, 2009.

The Company's December 31, 2009 reserves were independently evaluated by McDaniel & Associates Consultants Ltd. ("McDaniel") in accordance with National Instrument 51-101 ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook. The reserve information presented herein utilizes McDaniel's January 1, 2010 price forecast and cost assumptions.

The reserve data provided in this news release represents only a portion of the disclosure required under NI 51-101. All of the required disclosure information will be contained in the Company's Annual Information Form to be filed on SEDAR before the end of March 2010 and which will be accessible electronically at www.sedar.com.


- Increased proved plus probable reserves to 9.0 million boe from 0.4 million boe at year-end 2008; increased proved reserves to 4.4 million boe from 0.2 million boe at year-end 2008.

- Acquired 6.8 million boe of proved plus probable reserves at a cost of $14.91 per boe for total acquisition expenditures of $101 million.

- Achieved Finding and Development ("F&D") costs of $10.75 per boe on a proved plus probable basis and $26.35 per boe on a proved basis (excluding future development costs).

- Achieved Finding, Development and Acquisition ("FD&A") costs of $13.79 per boe on a proved plus probable basis and $26.04 per boe on a proved basis (excluding future development costs).

- Reported a proved plus probable reserves life index of 5.7 years, based on estimated December 2009 exit production of 4,300 boe/d.

Unless stated otherwise, reserves included in this news release are stated on a company interest basis, which represents Emerge's working interest in reserves before deduction of royalties and including royalty interests.

Reserves Summary

The following is a summary of the Company's reserves volumes at December 31,
2009 as compared to December 31, 2008:

Light Total Total
and Natural Oil Oil
Medium Heavy Natural Gas Equivalent Equivalent
Oil Oil Gas Liquids 2009 2008
Reserves Category (Mbbl) (Mbbl) (MMcf) (Mbbl) (Mboe) (Mboe)
Producing 128.1 2,813.4 334.2 24.7 3,021.9 89.7
Non-Producing - 471.9 5.6 - 472.9 58.3
Undeveloped 40.0 908.7 - - 948.7 34.6
Total Proved 168.1 4,194.0 339.9 24.7 4,443.4 182.6
Probable 76.2 4,409.7 463.0 9.0 4,572.0 209.8
Total Proved plus
Probable 244.4 8,603.6 802.9 33.7 9,015.5 392.4

Net Present Values of Future Net Revenue

The estimated future net revenues associated with Emerge's reserves at December 31, 2009 based on the McDaniel January 1, 2010 price forecast are summarized in the following table. It should not be assumed that the net present values estimated by McDaniel represent the fair market value of the reserves.

Before Income Taxes Discounted at (%/year):
0% 5% 10% 15% 20%
Reserves Category (MM$) (MM$) (MM$) (MM$) (MM$)
Developed Producing 61.3 58.8 56.4 54.1 52.0
Developed Non-Producing 9.5 8.3 7.4 6.7 6.0
Undeveloped 20.8 17.0 14.1 11.6 9.7
Total Proved 91.6 84.2 77.8 72.4 67.7
Probable 138.2 112.9 94.2 80.1 69.0
Total Proved plus Probable 229.8 197.1 172.1 152.4 136.7

Relevant portions of the McDaniel January 1, 2010 price forecast used in the
Company's evaluation are as follows:

WTI Edmonton Bow River Alberta
Crude Light Hardisty Heavy
Oil Crude Oil Crude Oil Crude Oil Alberta
40 40 25 12 AECO US/CAN
degrees degrees degrees degrees Spot Exchange
Year ($US/bbl) ($C/bbl) ($C/bbl) ($C/bbl) (C$/MMBtu) ($US/$CAN)
2010 80.00 83.20 72.30 68.10 6.05 0.950
2011 83.60 87.00 73.80 67.60 6.75 0.950
2012 87.40 91.00 74.40 68.00 7.15 0.950
2013 91.30 95.00 75.80 68.10 7.45 0.950
2014 95.30 99.20 79.20 71.10 7.80 0.950
2015 99.40 103.50 82.60 74.20 8.15 0.950
2016 101.40 105.60 84.30 75.70 8.40 0.950
2017 103.40 107.70 85.90 77.20 8.55 0.950
2018 105.40 109.80 87.60 78.70 8.70 0.950
2019 107.60 112.10 89.40 80.40 8.90 0.950
2020 109.70 114.30 91.20 81.90 9.05 0.950
2021 111.90 116.50 93.00 83.60 9.25 0.950
2022 114.10 118.80 94.80 85.20 9.45 0.950
2023 116.40 121.20 96.70 86.90 9.65 0.950
2024 118.80 123.70 98.70 88.70 9.85 0.950
Thereafter Escalated at 2% per year 0.950

Reserves Reconciliation

Proved plus
Proved Probable Probable
(Mboe) (Mboe) (Mboe)
December 31, 2008 Opening Balance 182.6 209.8 392.4
Discoveries 58.8 64.6 123.4
Extensions 1,022.8 1,450.3 2,473.1
Technical Revisions -61.6 -34.2 -95.8
Acquisitions 3,889.6 2,881.6 6,771.2
Production -648.8 - -648.8
December 31, 2009 Closing Balance 4,443.4 4,572.1 9,015.5

Finding and Development Costs ("F&D")

Under NI 51-101, the methodology to be used to calculate F&D costs includes incorporating changes in future development costs required to bring the proved undeveloped and probable reserves to proved producing status, and eliminates the effects of acquisitions. Emerge has presented F&D costs both excluding acquisitions and including acquisitions ("FD&A") and has presented F&D and FD&A costs both including and excluding changes in future development costs, as management uses these additional figures in assessing performance and capital efficiency.

Proved plus
Proved Probable
Capital Expenditures (M$)
Exploration and Development Expenditures (1) 26,876 26,876
Change in Future Development Costs 15,225 40,167
Finding and Development Costs 42,101 67,043
Net Acquisition Costs (2) 100,967 100,967
Finding, Development and Acquisition Costs 143,068 168,010

Reserve Additions (Company Interest) (Mboe)
Exploration and Development (3) 1,020.0 2,500.7
Acquisitions 3,889.6 6,773.7
Total reserve additions 4,909.6 9,274.4

Finding and Development Costs ($/Boe)
Excluding FDC 26.35 10.75
Including FDC 41.28 26.81

Finding, Development and Acquisition Costs ($/Boe)
Excluding FDC 26.04 13.79
Including FDC 29.14 18.12
(1) Capital expenditures exclude acquisition and disposition capital, and
exclude office assets
(2) Capital expenditure amounts of acquisitions reflect the actual purchase
price of the acquisitions rather than the amounts allocated to property
and equipment for accounting purposes.
(3) Includes extensions and technical revisions

The following cautionary statement is required by NI 51-101: Total exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally does not reflect the total costs of reserve additions for that year.

Reserve Life Index (RLI)

The reserve life index has been calculated based on December 31, 2009 reserves divided by estimated December 2009 exit production rates.

Proved plus
Proved Probable
Company interest reserves (Mboe) 4,443.4 9,015.5
Estimated December 2009 exit production (Boe/d) 4,300 4,300
RLI (years) 2.8 5.7

Other Information

Emerge anticipates releasing its audited financial statements and related management's discussion and analysis for the year ended December 31, 2009 on or about March 24, 2010. As noted by the 2009 reserves, 2009 was a year of growth primarily by acquisition for Emerge. Approximately 75% of the reserve bookings for 2009 relate to the two major acquisitions the Company completed in 2009: the corporate acquisition of Ivory Energy Inc. in March 2009, and the Lloydminster area property acquisition in November 2009. The Company's exploration and development program was focused toward the late third and fourth quarters of 2009 and accordingly the acquisition portion of the FD&A costs dominate Emerge's 2009 reserves base. The Company believes that finding and development costs in 2010 and beyond will trend lower as our capital programs are executed on the acquired asset base. With the two acquisitions in 2009, the Company has assembled a focused reserve base in two core areas, being the Greater Lloydminster area of Saskatchewan and Alberta and the Battlebend area of East-Central Alberta, and is positioned to further develop these areas in 2010 with its capital program while remaining flexible to acquisition opportunities and adding new core areas should economic conditions allow.

All amounts in this news release are stated in Canadian dollars unless otherwise specified. Numbers presented in tables may not add exactly due to rounding. Where applicable, natural gas has been converted to barrels of oil equivalent ("Boe") based on 6 Mcf:1 Boe. The Boe rate is based on an energy equivalency conversion method which is primarily applicable at the burner tip and does not represent value equivalence at the wellhead. Boe figures may be misleading, particularly if used in isolation. Unless otherwise specified, all reserves volumes and revenues included in this news release are presented on a "company interest" basis. "Company interest reserves" consist of "company gross reserves" (as defined in NI 51-101) plus Emerge's royalty interests in reserves. "Company interest reserves" is not a measure defined in NI 51-101 and has no standardized meaning under NI 51-101. Accordingly, our Company interest reserves may not be comparable to reserves presented or disclosed by other issuers.

Certain financial and operating information included in this news release for the year ended December 31, 2009, such as finding and development costs, production information, operating netbacks, recycle ratios and net asset value calculations are based on estimated unaudited financial results for the year ended December 31, 2009. These estimated amounts may change upon completion of the audited financial statements for the year ended December 31, 2009 and those changes may be material.


Boe barrel of oil equivalent
M thousands
M$ thousands of Canadian dollars
Mbbl thousands of barrels
Mboe thousands of barrel of oil equivalent
MM millions
MM$ millions of Canadian dollars
MMcf millions of cubic feet

About Emerge Oil & Gas Inc.

Emerge is engaged in the exploration for and development and production of oil and natural gas in Western Canada. The Company currently operates within two principal areas, namely, the Lloydminster area of West-Central Saskatchewan and East-Central Alberta and the Battlebend area of East-Central Alberta. Emerge is headquartered in Calgary, Canada.

Forward-Looking Information and Statements

Certain statements contained in this news release constitute "forward-looking information" or "forward-looking statements" under applicable securities laws. Such forward-looking information and statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects", "does not expect", "is expected", "anticipates", "does not anticipate", "plans", "estimates" or "intends", or stating that certain actions, events or results "may", "could", "would", "might", or "will" be taken, occur or be achieved) are not statements of historical fact and should be viewed as forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: the volumes and estimated value of Emerge's oil and gas reserves; the life of Emerge's reserves; the volume and product mix of Emerge's oil and gas production; future oil and gas prices; expectations for future finding and development costs; and operating metrics.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: the impact of general economic conditions; oil and gas industry conditions; volatility of commodity prices; change in the demand for Emerge's products; currency fluctuations; imprecision of reserve estimates; changes in tax, environmental, royalty or other government policies and regulations; competition from other industry participants; unanticipated operating results or production declines; and competition for qualified personnel and management; ability to access sufficient capital from internal and external sources. Although the Company has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements there may be other risks and factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements. The forward-looking statements contained in this news release are made as of the date hereof and the Company does not intend, and does not assume any obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws.

Contact Information

  • Emerge Oil & Gas Inc.
    Thomas J. Greschner
    Chairman, President & CEO
    403.718.3851 (FAX)
    Emerge Oil & Gas Inc.
    Anita Tonn
    Vice President, Finance & CFO
    403.718.3851 (FAX)