TRAFINA Energy Ltd.
TSX VENTURE : TFA.A

TRAFINA Energy Ltd.

March 30, 2010 18:09 ET

Trafina Energy Ltd. Announces Year-End 2009 Reserves and Updates Reserves After Year End Additions and Dispositions

CALGARY, ALBERTA--(Marketwire - March 30, 2010) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

Trafina Energy Ltd. ("Trafina" or "the Company") (TSX VENTURE:TFA.A) is pleased to provide a summary of the Company's reserves at December 31, 2009 and to provide an update based on its recent purchase of southwest Saskatchewan assets (see the Company's January 21, 2010 press release for more information).

Highlights of activities in 2009 that impacted Trafina's reserves are as follows:

  • The Company increased average production 34% to 402 barrels of oil equivalent ("boe") per day for 2009 and from 300 boe per day for 2008. The increase in production was due to the addition of 19 (6.5 net) coal bed methane (CBM) wells in the Wetaskiwin area, and the re-activation of several wells acquired in a purchase in September 2009 (see the Company's September 14, 2009 press release for more information). The Company also drilled 3 (2.5 net) wells in the fourth quarter of 2009. An oil well in the Ronalane area of south-east Alberta was completed, tied-in and on production in late December 2009. The second well, a Rock Creek test in the Pembina area of Alberta, was completed for Ellerslie gas in February 2010. Management believes the Pembina area well has additional multi-zone potential including the drilling of up to four Cardium horizontal oil wells that may be undertaken in the second half of 2010. The third well, also at Ronalane, was abandoned. 
  • As a result of the economic down-turn that continued in 2009, the Company re-focused its strategy and acquired a number of undervalued assets, which management believes can be optimized and exploited. In September 2009, Trafina acquired a 50% interest in certain assets in Alberta and Saskatchewan for $5 plus an overriding royalty obligation and assumption of related well abandonment and reclamation liabilities. To date, two wells have been drilled on these lands, and several wells have been optimized and/or re-completed. On November 12, 2009 the Company completed the purchase from a Canadian chartered bank, of the outstanding indebtedness and liabilities of a private oil and gas corporation with assets in southwest Saskatchewan. In late 2009, Trafina appointed a receiver and acquired the corporation's assets on January 15, 2010 in exchange for the debt and liabilities owing to the Company. A number of the acquired wells have been re-activated and management anticipates that the prior production rate of 160 boepd (75% oil) will be achieved by the end of March 2010.
  • On December 3, 2009 the Company completed a private placement of units (consisting of Class A common shares and share purchase warrants) and flow through shares for gross proceeds of $2.5 million. Net proceeds of the private placement were used to reduce Trafina's indebtedness and for general working capital purposes.

Additional information relating to the results of Trafina's operations during 2009 and its statement of reserves data (and related report of qualified reserve evaluators and management and board of Trafina) will be set forth in the Company's audited financial statements and accompanying management's discussion and analysis for the year ended December 31, 2009 and its annual information form for the year ended December 31, 2009, respectively, which the Company expects will be filed on SEDAR on or about April 28, 2010.

Summary of Year-End 2009 Reserves

The Company recorded positive proved plus probable reserves additions of 59 Mboe resulting from drilling, acquisition and technical revisions in 2009. As a result of continued weak natural gas prices throughout 2009, Trafina switched its focus during the year from natural gas development to oil exploitation. This change resulted in an 8% decrease in total proved plus probable reserves, net of production, for the year ended December 31, 2009. The Company's reserves were 85% gas weighted as at December 31, 2009.

The Company's December 31, 2009 reserves were evaluated in accordance with the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities by McDaniel and Associates Consultants Ltd. ("McDaniel") and GLJ Petroleum Consultants Ltd. ("GLJ"), independent reserves evaluators of Calgary, Alberta, in a report prepared by McDaniel dated March 30, 2010 and effective December 31, 2009 (the "McDaniel Report") and in a report prepared by GLJ dated March 30, 2010 and effective December 31, 2009 (the "GLJ Report"), respectively. The following summary is based on a roll-up by McDaniel of year-end 2009 reserves using McDaniel's price deck, and is based on the McDaniel Report and the GLJ Report. The summary does not include reserves attributable to the southwest Saskatchewan assets acquired in January 2010. The impact of this acquisition (along with certain dispositions) is discussed below under the heading "Summary of Updated Reserves".

Year-End 2009 Reserves - Net Present Value
 (based on forecast prices and costs) (before income tax) (M$)
 
Discount Factor Total
Proved
Total
Probable
Total
Proved
Plus
Probable
5% 8,954 7,499 16,453
10% 7,681 5,737 13,419
15% 6,803 4,581 11,384
       
 Year-End 2009 Reserves - Barrels of Oil Equivalent (000's)
       
 

Total
Proved


Total
Probable
Total
Proved
Plus
Probable
Mboe 638.3 371.2 1,009.6
 Year-End 2009 Reserves – McDaniel Commodity Price Assumptions
     
  Light Sweet Oil Edmonton Par ($CDN/bbl) AECO/NIT-Spot ($CDN/MMBTU)
2010 83.20 6.05
2011 87.00 6.75
2012 91.00 7.15
2013 95.00 7.45
2014 99.20 7.80

Trafina's proved plus probable reserve life index (RLI), based on fourth quarter 2009 average production, is 6.9 years.

Summary of Updated Reserves

Consistent with its revised strategy, in January 2010 Trafina finalized the acquisition of the southwest Saskatchewan assets (see the Company's October 29, 2009 press release for more information). Also in the first quarter of 2010 Trafina sold its 3.42% interest in the Bindloss Unit #1 ("Bindloss") gas property in southern Alberta for approximately $1.4 million and sold a minor interest in the Eyremore area of Alberta for approximately $96,000. As the southwest Saskatchewan assets are not included in Trafina's year-end 2009 reserves reports, at Trafina's request, GLJ evaluated the southwest Saskatchewan properties in a report prepared by GLJ dated March 30, 2010 and effective December 31, 2009 (the "GLJ Saskatchewan Report"). The following summary is based on a roll-up by McDaniel of 2010 reserves, additions (and dispositions) with McDaniel's price deck and is based on the McDaniel Report, the GLJ Report, including the GLJ Saskatchewan Report, and reflects the sale of the Company's interest in Bindloss and Eyremore.

As a result of the asset acquisition and dispositions in the first quarter of 2010, Trafina's proved plus probable reserves increased by 568 Mboe, a 56% increase in total proved plus probable reserves compared to reserves as at December 31, 2009. The first quarter 2010 acquisition and dispositions changed the Company's reserves weighting as at December 31, 2009 from being 85% gas weighted to 55% gas weighted.

Summary of Updated Reserves - Net Present Value
(adjusted for property acquisition and sales and based on forecast prices and costs) (before income tax) (M$)
       


Discount
Factor


Total
Proved


Total
Probable
Total
Proved
Plus
Probable
5% 11,611  16,345 27,956
10% 10,443 12,841 23,284
15% 9,463 10,318 19,781
Summary of Updated Reserves - Barrels of Oil Equivalent (000's)
       
  Total
Proved
Total
Probable
Total
Proved
Plus
Probable
Mboe 802.3 775.5 1577.8
Summary of Updated Reserves – McDaniel Commodity Price Assumptions 
 
  Light Sweet Oil Edmonton Par ($CDN/bbl) AECO/NIT-Spot ($CDN/MMBTU)
2010 83.20 6.05
2011 87.00 6.75
2012 91.00 7.15
2013 95.00 7.45
2014 99.20 7.80

Trafina's adjusted proved plus probable reserve life index (RLI), based on fourth quarter 2009 average production, is 10.8 years.

About Trafina

Trafina is a junior oil and gas company based in Calgary, Alberta. The Company's main areas of interest are in the Rangeview and Divide areas of southwest Saskatchewan and in the Pembina area of Alberta with other operated production in Wetaskawin, Retlaw and Ronalane in Alberta. Trafina also has non-operated production in Viking/Kinsella, Alberta and minor interests in Jenner and Carson Creek/Judy Creek, Alberta. Trafina's shares trade on the TSX Venture Exchange under the stock symbol TFA.A.

Basis of Presentation and Cautionary Statement: Information in this press release expressed in boes is derived by converting natural gas to oil in the ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil. 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 a value equivalency at the wellhead.

Forward Looking Statements: This news release contains forward looking statements and forward looking information regarding, among other things, estimated reserves, estimated future net revenue, management's approach to operations, expectations relating to wells that may be drilled (including locations, targeted formations and number of wells) and amount and timing of capital projects. Forward looking information is based on management's expectations regarding future growth, results of operations, production, future commodity prices and foreign exchange rates, future capital and other expenditures (including the amount, nature and sources of funding thereof), plans for an results of drilling, environmental matters, business prospects and opportunities and future economic conditions. Statements relating to reserves involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated, and can be profitably produced in the future. Readers are cautioned that assumptions used in the preparation of such statements may prove to be incorrect. Forward looking statements involves significant known and unknown risks and uncertainties. Reference is made to Trafina's annual information form for the year ended December 31, 2008 and thereafter Trafina's annual information form for the year ended December 31, 2009 (once filed) for a description of some of the risks that could affect the Company's future results and could cause results to differ materially from those expressed in the Company's forward looking statements. The forward looking statements contained in this news release are made as at the date hereof and, except as required by applicable securities laws, Trafina does not undertake any obligation to update publicly or otherwise any such statements.

(TSX VENTURE:TFA.A)

Neither the 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

  • Trafina Energy Ltd.
    Kelly J. Ogle
    President and Chief Executive Officer
    (403) 263-0800
    (403) 263-0811 (FAX)
    or
    Trafina Energy Ltd.
    Robert W. Lamond
    Chairman
    (403) 269-9889
    (403) 269-9890 (FAX)
    info@trafinaenergy.com