PetroBakken Energy Ltd.

PetroBakken Energy Ltd.

March 03, 2010 01:29 ET

PetroBakken Announces Year End Reserves and Operational Update

CALGARY, ALBERTA--(Marketwire - March 3, 2010) - PetroBakken Energy Ltd. ("PetroBakken" or the "Company") (TSX:PBN) a 64% owned subsidiary of Petrobank Energy and Resources Ltd. ("Petrobank") (TSX:PBG) is pleased to announce the Company's year-end reserves and provide an operational update.


(Annual comparisons are 2009 compared to 2008 and quarterly comparisons are fourth quarter 2009 compared to the fourth quarter of 2008. All references to $ are Canadian dollars unless otherwise noted.)

  • Fourth quarter 2009 average production increased by 105% to 45,621 barrels of oil equivalent per day ("boepd") from 22,274 boepd. 
  • Proved plus probable ("2P") reserves increased by 146% to 143.6 million barrels of oil equivalent ("boe") at December 31, 2009.
  • 2009 working interest production was replaced more than ten times as a result of increases in reserves from operations and acquisitions.
  • Net present value ("NPV") (before tax, discounted at 10%) of 2P reserves increased by 145% to $3.7 billion.
  • 2P finding, development and acquisition ("FD&A") costs, including revisions and future development costs of $32.11 per boe. Excluding net acquisitions, including the TriStar Oil & Gas Ltd. ("TriStar") acquisition, our 2P finding and development ("F&D") costs were $30.82 per boe.
  • January 2010 production averaged 43,600 boepd, after the disposition in December 2009 of approximately 2,000 boepd.
  • We anticipate further dispositions of non-core producing assets in the first quarter of 2010 totalling 3,800 boepd.
  • To-date in 2010, we have announced three corporate acquisitions focussing on the Cardium light oil resource play in Alberta. In addition to more than 500 development drilling locations for Cardium, these assets are expected to initially add, in aggregate, approximately 5,800 boepd of production.
  • Since July, 2009, PetroBakken has been implementing the use of long bilateral horizontal wells with 51 bilateral horizontal wells now on production. Bilateral horizontal wells have generated on average greater than a 50% increase in productivity compared to offset single leg Bakken horizontal wells.


Sproule Associates Limited ("Sproule") has completed their evaluation of PetroBakken's reserves, dated March 1, 2010, effective as at December 31, 2009 ("Sproule Evaluation"). All reserves are based on forecast prices and costs and are Company gross reserves.

2009 was a very active year for PetroBakken in both organic activity and acquisitions and divestitures. PetroBakken was created through the spin out of Petrobank's Canadian Business Unit, followed by the acquisition of TriStar. Prior to TriStar being acquired by PetroBakken, TriStar had completed a significant transaction on March 31, 2009 when it acquired 50% of Talisman's southeast Saskatchewan assets. In December 2009, PetroBakken sold certain assets in the Ante Creek area of Alberta. The Sproule Evaluation reflects the impact of these acquisitions and divestitures. 

PetroBakken Working Interest Reserves(1)        
Forecast Prices(2)        
  Total Oil NGL Natural Gas Total
  (mbbl) (mbbl) (mmcf) (mboe)
Proved Developed Producing 48,196 2,256 53,757 59,412
Total Proved 71,629 3,125 88,299 89,470
Proved + Probable (2P) 116,085 5,047 135,035 143,638

(1) Company working interest reserves excluding royalty income reserves and before deduction of royalties payable.
(2) Based on the Sproule price forecast effective December 31, 2009.

Royalty income volumes are excluded from Company gross reserves noted above but are included in calculating Company net reserves and net present values. Production in 2009 included 540 boepd of royalty income production. 

PetroBakken Net Present Value – Before Tax ($ millions)          
Forecast Prices          
As at December 31, 2009          
  0% 5% 8% 10% 15%
Proved Developed Producing 3,029.6 2,321.7 2,059.0 1,921.1 1,659.3
Total Proved 4,103.5 3,056.4 2,663.0 2,455.9 2,062.2
Proved + Probable (2P) 7,000.7 4,794.0 4,035.0 3,651.2 2,951.9
PetroBakken Net Present Value – After Tax ($ millions)          
Forecast Prices          
As at December 31, 2008          
  0% 5% 8% 10% 15%
Proved Developed Producing 2,675.2 2,064.4 1,837.8 1,718.8 1,493.0
Total Proved 3,450.4 2,586.4 2,261.2 2,089.8 1,763.7
Proved + Probable (2P) 5,552.3 3,859.3 3,269.4 2,969.4 2,419.7

Reserve Reconciliation – Forecast Prices (mboe)

  Developed Total Proved +
  Producing Proved Probable
PetroBakken reserves at December 31, 2008 26,448 39,781 58,438
2009 production net of royalty interest (9,414) (9,414) (9,414)
Acquisitions 35,319 49,768 78,187
Net additions and revisions 7,060 9,335 16,427
PetroBakken reserves at December 31, 2009 59,412 89,470 143,638
PetroBakken year-over-year increase in reserves 125% 125% 146%
PetroBakken production replacement 450% 628% 1,005%

PetroBakken FD&A Costs (1)

  Finding & Development Acquisitions (2) FD&A
Capital expenditures (unaudited-$000s)(3)      
  Capital expenditures 385,911 8,112 394,023
  Corporate acquisition capital (4) - 1,986,728 1,986,728
  Total capital 385,911 1,994,840 2,380,751
Change in future development costs ($000s)      
  Total Proved 5,302 349,998 355,300
  Proved + Probable (2P) 120,322 536,678 657,000
Total costs ($000s)      
  Total Proved 391,213 2,344,838 2,736,051
  Proved + Probable (2P) 506,233 2,531,518 3,037,751
Net reserve additions (mboe)      
  Total Proved 9,335 49,768 59,103
  Proved + Probable (2P) 16,427 78,187(5) 94,614
FD&A costs ($/boe)      
  Total Proved 41.91 47.12 46.29
  Proved + Probable (2P) 30.82 32.38 32.11

(1) The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.
(2) Includes the acquisition of TriStar and other assets, and the disposition of approximately 2,000 boepd of assets.
(3) The Company's annual audit of our consolidated financial statements is not yet complete and accordingly all financial amounts are management's best estimates which are unaudited and subject to change.
(4) Portion of purchase price allocated to property, plant & equipment and reflects TriStar net present value as at October 1, 2009 based on 2P NPV10%, before tax.
(5) 2P acquisition reserve volumes net of dispositions at December 31, 2009 include the effect of the Ante Creek disposition of 7.5 mmboe.

PetroBakken had FD&A costs that were dominated by the TriStar acquisition completed on October 1, 2009. In 2009, excluding acquisitions, PetroBakken achieved 2P F&D costs of $30.82/boe. When acquisitions are included, the FD&A costs were $32.11/boe, including changes in future development costs. Costs reflected in this calculation consist of all investments, extensive growth in Bakken infrastructure, and acquisitions of new large land positions. Future development capital associated with the TriStar acquisition represents $5.67 per boe of our FD&A costs. 

Although the acquisitions have created a substantial growth platform for the Company, there was a negative revision to the acquired reserves that occurred when Sproule's standards and methodology were applied on a portion of TriStar's existing reserve base. Of particular note, our reserves were negatively impacted by reductions to the 2P reserves of certain southeast Saskatchewan assets, which resulted in the removal of a significant number of 2P undeveloped locations, leading to a negative revision of 4.8 mmboe to our reserves. TriStar acquired these assets from Talisman on June 1, 2009, with a non-Sproule reserves evaluation effective March 1, 2009. 

Our enhanced bilateral drilling approach in the Bakken has demonstrated our ability to increase primary recoveries from the reservoir and expand the economic limits of this resource play. The ongoing modifications and improvements to our fracture stimulation techniques result in fractures that are statistically less likely to break out of zone, resulting in wells with lower water cuts in areas where the bounding shale zones to the Bakken are thinner. Our bilateral horizontal wells with high intensity fracture stimulations access more of this low permeability reservoir and outperform offsetting single leg horizontal wells. However, despite the improved performance, the short production history from our bilateral horizontal wells does not yet provide Sproule with the sufficient data to fully recognize incremental reserves in all our Bakken lands. 

The play extension areas of the Bakken reservoir represent both a significant asset and focus for PetroBakken. Our Bakken capital plan is to drill all wells as bilateral horizontal wells. The capital investment plan for the Bakken in 2010 will focus on drilling in areas where demonstrating this increased performance will maximize our future reserve additions. The numerous proved undeveloped and probable locations in these play extension areas will benefit from the increased production history from all bilateral horizontal wells. As the future capital in our reserve report already represents bilateral drilling costs, these future potential increases in reserves can be recognized without material additional future costs.


PetroBakken achieved record results in 2009 with significant increases in high netback reserves and production. PetroBakken's 2009 average production increased 47% to 26,333 boepd from 17,775 boepd in 2008. In the fourth quarter, PetroBakken production averaged 45,621 boepd, an increase of 105% over the fourth quarter of 2008. In December, 2009, Company production averaged 45,900 boepd, of which 38,200 boepd was produced from our core properties in southeast Saskatchewan and British Columbia. Average January production is estimated at approximately 43,600 boepd, after the disposition in December 2009 of approximately 2,000 boepd.

PetroBakken drilled 157 gross wells (152 oil wells, 3 gas wells and 2 dry & abandoned ("D&A") wells) and 117.3 net wells (113.3 oil, 2.5 gas and 1.5 D&A) in 2009. All of these oil wells were in southeast Saskatchewan, while all of these gas wells were in the Monias and Horn River unconventional gas plays in northeast British Columbia.

PetroBakken currently has 12 rigs drilling in southeast Saskatchewan, 10 rigs working in the Bakken, and two rigs in our conventional Mississippian plays. PetroBakken will continue to develop infrastructure in this area and we plan to build two more major oil batteries and expand the existing Midale gas plant from 8 mmscfd to 13 mmscfd to handle the additional solution gas volumes.

In northeast British Columbia PetroBakken has successfully drilled, completed and tied in a Muskwa shale gas well in the Horn River basin. The well is on production and we are evaluating its performance for future drilling opportunities in the area. At Monias, PetroBakken drilled and is completing a Montney gas well. The well was drilled as a long bilateral horizontal well. The first leg has been production tested at initial production rates in excess of 6 mmscfd. The second leg is presently being fracture stimulated. We anticipate placing this well back on production in March 2010.

Our business plan continues to be focussed on developing and expanding our inventory of light oil locations. Following spring break-up, our 2010 drilling program will be re-aligned to take advantage of our expanded drilling inventory in the Cardium play of Alberta. Current plans anticipate an eight to ten rig program in the Bakken and conventional plays of southeast Saskatchewan and six drilling rigs operating in the Cardium. 


In July 2009, PetroBakken initiated a bilateral horizontal well drilling program in southeast Saskatchewan to increase pay contact and fracture density in the Bakken formation. To-date, PetroBakken has drilled 65 long bilateral horizontal wells with more than 50 wells now on production. Performance from these wells has been very encouraging with an average production performance increase of greater than 50% when compared to the single leg horizontal wells offsetting these bilateral horizontal wells. 

The use of the bilateral horizontal well technology is another example of how PetroBakken has been, and continues to be, at the forefront of adopting new technologies to exploit both conventional and unconventional resources. PetroBakken will continue to refine these recovery methods, and adopt new ones as they are encountered, in the Bakken and other unconventional reservoirs.


During the first quarter of 2010, PetroBakken has completed two asset package dispositions and anticipates closing a further two asset dispositions representing approximately 3,800 boepd. Including assets sold prior to year end, we anticipate selling a total of 5,800 boepd for gross proceeds of approximately $315 million.

PetroBakken Energy Ltd. is a premier light oil production company combining, high growth, long-life Bakken reserves and production with legacy conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. PetroBakken has a multi-year inventory of Bakken and light oil development locations, along with significant future development opportunities in the Horn River and Montney gas resource plays in northeast BC and the Cardium in Alberta. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield.

Forward-Looking Statements. Certain information provided in this press release constitutes forward-looking statements. The words "anticipate", "expect", "project", "estimate", "forecast" and similar expressions are intended to identify such forward-looking statements. Specifically, this press release contains forward-looking statements relating to the results from operations, reserves, potential reserves, production, and drilling locations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: the uncertainty of reserve estimates; general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling; recompletions and related activities; timing and rig availability, changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by PetroBakken that actual results achieved during the forecast period will be the same in whole or in part as those forecast. Except as may be required by applicable securities laws, PetroBakken assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

BOE disclosure provided herein in respect of boes 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 an economic value at the wellhead.

Contact Information

  • PetroBakken Energy Ltd.
    John D. Wright
    Chairman of the Board and Chief Executive Officer
    PetroBakken Energy Ltd.
    R. Gregg Smith
    President and Chief Operating Officer
    PetroBakken Energy Ltd.
    Corey C. Ruttan
    Executive Vice President and Chief Financial Officer
    PetroBakken Energy Ltd.
    Peter D. Scott
    Vice President, Finance
    PetroBakken Energy Ltd.
    Bill A. Kanters
    Vice President Business Development and Corporate Planning
    403.268.7808 (FAX)