Excelsior Energy Limited
TSX VENTURE : ELE

Excelsior Energy Limited

April 14, 2010 17:19 ET

Excelsior Announces Independent Resource Update and 60% Increase in Net Present Value at Hangingstone

CALGARY, ALBERTA--(Marketwire - April 14, 2010) - Excelsior Energy Limited (TSX VENTURE:ELE) ("Excelsior" or "the Company") is pleased to announce the completion of an updated independent evaluation of bitumen resources on Excelsior's Hangingstone property ("Hangingstone" or "Hangingstone Asset"), near Fort McMurray, Alberta. The mechanical update was based on the previous report "Evaluation of the Hangingstone Area, Estimation of Discovered & Undiscovered Bitumen Initially-In-Place and Contingent and Prospective Resources, as of July 1, 2009". The Company has drilled a total of 55 wells on the Hangingstone property where Excelsior has a 75% working interest in 39 contiguous sections of oil sands rights.
.
The resource estimates were prepared by independent petroleum engineers McDaniel & Associates Consultants Limited ("McDaniel"). The McDaniel report ("the Report") was prepared using assumptions and methodology guidelines outlined in the Canadian Oil and Gas Evaluation Handbook and in accordance with National Instrument 51-101. No additional geological or engineering work was conducted and the resource estimates, production forecasts, operating costs and capital cost parameters are unchanged from the July 01, 2009 report prepared by McDaniel. The effective date of the updated evaluation is December 31, 2009. The Report incorporates the McDaniel price deck as at January 1, 2010 in the forecast price scenario. The one percent gross overriding royalty that burdened the Hangingstone asset and was included in the July 1, 2009 report has been paid out and has therefore been removed as disclosed in a news release dated January 7, 2010.

"Excelsior is very pleased with the incremental valuation assigned at Hangingstone." commented David Winter, CEO and President of Excelsior, "McDaniel assesses the asset based on conventional SAGD technology. The valuation for the best case contingent resources using a 10% discount is $332 million to Excelsior's working interest share, a 60% increase from the July 1, 2010 evaluation, and $708 million for the high estimate contingent resources. The contingent resources are assigned to only 24% of the gross Hangingstone lands. As the financing environment for oil sands development improves we look forward to further delineation of the high quality bitumen resources at Hangingstone, building the COGD pilot project and moving closer to commercial bitumen production."

Discovered and Undiscovered Petroleum Initially-in-Place

McDaniel has recognized best estimate Discovered Petroleum Initially-in-Place of 1.808 billion barrels on the Hangingstone Asset in proximity to well control (Excelsior working interest share before royalty) with a low estimate of 1.262 billion barrels and a high estimate of 2.361 billion barrels. The area included in Discovered Petroleum Initially-in-Place assignments, based on well control, amounts to approximately 24% of the gross Hangingstone lands. Generally, McDaniel's methodology for the assignment of Discovered Petroleum Initially-In-Place requires a minimum delineation density of one well per square mile.

McDaniel has determined additional prospectivity in an Undiscovered Petroleum Initially-in-Place assignment. The Report assigns 2.849 billion barrels of best estimate Discovered and Undiscovered Petroleum Initially-in-Place to the Hangingstone Asset (Excelsior working interest share before royalty) with a low estimate of 2.137 billion barrels and a high estimate of 3.561 billion barrels.

The total Discovered Petroleum Initially-in-Place and Undiscovered Petroleum Initially-in-Place includes unrecoverable volumes and is not an estimate of the volumes of the substances that will ultimately be recovered.

Contingent Resources

The Report assigned Contingent Resources to the Hangingstone Property based on the well delineation density achieved as of March 31, 2009. Best estimate Contingent Resources were estimated at 172 MMbbls (Excelsior working interest share before royalty); low estimate Contingent Resources were estimated at 127 MMbbls and high estimate Contingent Resources were estimated at 230 MMbbls. The assigned Contingent Resources are further categorized as economic.

The Report estimated that Excelsior's best estimate Contingent Resources would generate $2.7 billion of future net revenue after deduction of $3.4 billion in future full-cycle capital requirements over a 30 year field life and abandonment costs of $55.5 million resulting in a net present value before income tax discounted at 10% ("NPV10") of $332 million. On a NPV10 unit basis the report valued Excelsior's Contingent Resources at $1.93 per barrel. It should not be assumed that the estimates of net present value described above represents the fair market value of the Company's resources.

McDaniel calculates Contingent Resources based on that portion of Discovered Petroleum-Initially-in-Place that meets the requisite minimum qualitative and quantitative criteria to be exploited using conventional SAGD technology. The Contingent Resource volumes have not been classified as Reserves at this time pending further delineation drilling, development planning and regulatory applications. There is no certainty that it will be commercially viable to produce any portion of the Contingent Resources identified in the McDaniel report.

Share Value based on Contingent Resource and Common Shares Outstanding

On a per share basis the estimated NPV10 for best estimate Contingent Resources equates to $2.29 per Excelsior common share outstanding. The estimated NPV10 for the high estimate Contingent Resources equates to $4.88 per Excelsior common share outstanding. There are approximately 144.5 million Excelsior common shares outstanding. It should not be assumed that the estimates of net present value described above represents the fair market value of the Company's securities.

Prospective Resources

McDaniel also assigned Prospective Resources to Hangingstone. Best estimate Prospective Resources were estimated at 75 MMbbls (Excelsior working interest share before royalty); low estimate Prospective Resources were estimated at 49 MMbbls and high estimate Prospective Resources were estimated at 92 MMbbls.

McDaniel calculates Prospective Resources based on that portion of Undiscovered Petroleum-Initially-in-Place that is expected to meet the requisite minimum qualitative and quantitative criteria to be exploited using conventional SAGD technology. The Prospective Resource volumes have not been classified as Contingent Resources at this time pending additional delineation drilling. There is no certainty that it will be commercially viable to produce any portion of the Prospective Resources identified in the McDaniel report.

Summary Tables Resources

Summary of Discovered and Undiscovered
Petroleum Initially-in-Place
Hangingstone, Excelsior Working Interest Share Before Royalty
McDaniel & Associates – December 31, 2009
( Billions of barrels)
  Low Estimate Best Estimate High Estimate
Discovered Petroleum
Initially-in-Place

1.262

1.808

2.361
Discovered and Undiscovered Petroleum Initially-in- Place
2.137

2.849

3.561

 

Summary of Contingent and Prospective Resources
Hangingstone, Excelsior Working Interest Share Before Royalty
McDaniel & Associates – December 31, 2009
( Millions of barrels)
  Low Estimate Best Estimate High Estimate
Contingent Resources 127 172 230
Prospective Resources 49 75 92

Comparative Summary Tables Net Present Value

Summary of Contingent and Prospective Resources Net Present Value Before Tax 10 % Discount Hangingstone, Excelsior Working Interest Share McDaniel & Associates – December 31, 2009 ($ million)
  July 01, 2009 Dec 31, 2009
Low Estimate Contingent Resources (64 ) 13  
Best Estimate Contingent Resources 208   332  
High Estimate Contingent Resources 552   708  
         
Low Estimate Prospective Resources (78 ) (56 )
Best Estimate Prospective Resources 0   34  
High Estimate Prospective Resources 150   202  

It should not be assumed that the estimates of net present value presented in the table above represents the fair market value of the Company's resources.

Definitions:

  1. Discovered Petroleum Initially-in-Place
    • Defined as 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.
  2. Undiscovered Petroleum Initially-in-Place
    • Defined as 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.
  3. Contingent Resource
    • Defined 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 which are not currently considered to be commercially recoverable due to one or more contingencies. Economic contingent resources are those contingent resources that are currently economically recoverable.
  4. Prospective Resource
    • Defined as 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.
  5. Low Estimate
    • Defined as a conservative estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, this term reflects P90 confidence level.
  6. Best Estimate
    • Defined as the best estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used this term is a measure of central tendency of the uncertainty distribution (P50).
  7. High Estimate
    • Defined as an optimistic estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used the term reflects a P10 confidence level.

About Excelsior Energy

Excelsior is an early stage, oil sands company with 58 operated sections on two contiguous blocks in the Hangingstone and West Surmont areas of the Athabasca Oil Sands Region near Fort McMurray, Alberta. The Company has developed a proprietary in situ combustion technology ("Combustion Overhead Gravity Drainage" or "COGD") which has potential for improved economies in the development and recovery of heavy oil and bitumen. An application for an experimental pilot project to field demonstrate the COGD technology was submitted in at the end of the second quarter of 2009 with a targeted start up in early 2011. Excelsior's strategy is to capture oil and gas appraisal and development opportunities where we can leverage Management's diverse international operating, heavy oil and field development expertise with developing technologies to produce oil and gas. Additional information about Excelsior and its business activities is available on SEDAR at www.sedar.com or the Company's website at www.excelsior-energy.com.

Estimations of reserves and future net revenue discussed in this press release constitute forward looking statements. See "Forward Looking Statements" below.

Forward Looking Statements

This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of 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", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes. In particular, this press release contains forward-looking statements pertaining to the quantity of resources, the net present values of resources on a per share basis and the subsequent filing of an annual information form. Statements relating to "resources" are forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources described exist in the quantities predicted or estimated and can profitably be produced in the future.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to Excelsior and its shareholders.

Forward-looking statements are based on Excelsior's current beliefs as well as assumptions made by, and information currently available to, Excelsior concerning anticipated financial performance, business prospects, strategies, regulatory developments, future commodity prices, future production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market or products successfully to current and new customers, the impact of increasing competition, the ability to obtain financing on acceptable terms, and the ability to add production and ultimately reserves through development and exploration activities. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that forward-looking statements will not be achieved. These factors may be found under the heading "Risk Factors" in Excelsior's Annual Information Form for the year ended December 31, 2008.

The forward-looking statements contained in this press release are made as of the date hereof and Excelsior does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

Neither 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.

Contact Information